Evolution of an Investor: Lessons from the First Three Years

Having withdrawn $3000 to buy a truck I was left with $8000. From there I am now at $5800. That is minus $2200, but it is the best $2200 I've ever spent. It beats the hell out of the $29,000 I spent on college to no avail. It is what is referred to in the industry as market tuition. The return on that $2200 loss will be realized over time, but only if I heed all the lessons I've learned in 3 short years and keep an open mind to new knowledge. Investing is a humbling experience that teaches you to know thyself by exposing your weaknesses and neurotic tendencies.

I now have 3 accounts. One at Scottrade, one at TradeKing, and one at Vanguard. The Vanguard account is a traditional IRA and it is where the hard lessons learned from the other two accounts are being tested. 

By far the best thing I have done is taken Jim Cramer's advice and started trading/managing a simulator account. Investopedia.com has one but there are many out there and they are all free. The practice I am getting by 'paper trading' as it is known in online investing circles has sharpened my focus and awareness. When I have a large winner I start whittling in 1/4's. If I had 2000 shares and the stock goes from $10 to $14 I sell 500 shares; from $14 to $17, then I sell 500 more. 2000 shares @ $10 is $20,000; my two sales @ $14 and $17 net me $15,500 and I still have 1000 shares left that I bought for $4500, less than half of what I would have paid for 1000 shares @ $10!! I then hold that 1000 shares as a core position. That example was exactly what I did with ENPH, a solar company that I believe in in the long haul that had a quick jump to $17, I also own the 100 shares of ENPH in my IRA. Practice makes perfect in whatever you choose to try to master.

I mention Jim Cramer because his central message, beyond the hype and bells and whistles, is that you can manage a diversified portfolio of 5-8 high quality high earning companies. Building and trading around those core positions you can beat market indexes and over-diversified mutual funds. I am 100% convinced he is right on this one.