YNAB Podcast Episode 75: How I Tripled My Money in the Stock Market

Hello YNABers. My name is Jesse Mecham and this is podcast number 75 for You Need A Budget, where we teach you four rules to help you stop living pay check to pay check, get out of debt and save more money.

Today, though, I want to talk about making money: how I tripled my money in the stock market. It was 2005 and I was in a class at university, where… It was called Entrepreneurial Perspectives, it was my favorite class, and people would come in and speak. Those basically that had made it big – they would come in and just share how they made it big, and we would all just lap it up. And one guy came, he had been in the Air Force and started his own mutual fund because he loved investing. And all these pilots he worked with would say, “Hey, I heard you are into investing. Would you invest some of my money?” And so he got it all set up and literally started his own mutual fund. And he does really well – or he did back seven years ago. Really well. His returns were phenomenal, and most of the money was his but he managed other people’s as well, and it seemed like he really enjoyed what he was doing.

During the presentation he was showing us his current holdings – his portfolio. He shows it up on the PowerPoint slide and says, “Hey, do you guys have any questions?” and one of the students raised their hands and said, “What’s that SMD stock?” And he says, “Oh yes, of course you’ll point out that one that’s the big loser on my portfolio,” and he had purchased a pretty big chunk of this company, SMD was the ticker, and it had gone down by… it’s hard for me to remember the exact details, but I believe it had gone down from when he had purchased it by about 50%. And he told us that the company made karaoke machines, and he had done a lot of research into them and chatting with their board and all this stuff, and still felt like even at the price he bought it – which was now double what it was at – he said, “I still think it’s a really good buy.”

Well, we moved on in the class and I’m not sure what else was discussed. But I remember walking out of that room in the north west corner of the Business Building. I remember walking out of that room and saying, “You know, if he thinks that that stock – and he’s done all this research – if he still thinks that stock is a good buy at twice what it is, then I think I should buy some.” So I went to the computer lab, I logged into my Scottrade account where I had very little in there, but I invested $300 in this company Singing Machines. And then I set an order… I can’t remember what it’s called now. Anyway, I set a trigger so if it ever hit – I can’t remember what it was per share – but if it ever went triple what it was that I bought it at… I mean, it was something tiny per share, like $1 or something per share. If it ever did triple that, then I would want to sell it and it would just sell automatically. Well, I did that and then I forgot about it.

Months and months later, I get an email from Scottrade saying, “Your trade is executed,” and that’s that. And so of course, I go in and look, and lo and behold the Singing Machine stock had tripled over some period of months. It had just hit this big peak. I just checked on it now. I think it’s not even on the same exchange – they just tanked again.

So, the moral of the story is that I was very savvy and listened to this investor, got in on the ground floor of this fantastic oppor-… The moral of the story is that I got lucky. Because when you look and see now what the stock has done and how volatile it is, I just got lucky. So I don’t encourage investing in individual stocks unless you’ve got a hankering for living on the edge and you do it just with gravy money, play money, money you can absolutely, totally afford to lose that is not your retirement – because you cannot afford to lose your retirement. Your retirement fund is an acknowledgment that you’ll have expenses in the future when your earning power declines.

Anyway, I wanted to share that story with you guys, just partly spurred because of the investment course that I’ve been writing and working on, and something I hope to launch fairly soon.

Until next time, follow YNAB’s four rules and you will win financially. You have not budgeted like this.