The Urge to Swing for the Fences

20060825 Barry Bonds follow through

When I was a kid, I used to collect basketball cards. It was a fun hobby, but I had also read stories that a Michael Jordan rookie card was worth hundreds of dollars. And how other cards of Hall of Fame players from older generations were worth even more. I thought of my basketball cards as somewhat of an investment. I was hoping that I’d get a rookie card of a future Hall of Famer and that it would be worth hundreds or thousands of dollars 10 years or maybe 20 years from now. I bought a Shaquille O’Neal rookie card thinking he was a sure fire superstar and that it would be worth a lot in the future. I even paid $10 for it and that was a lot of money for me when I was a 12 year old. It was okay though, because I wanted to hit a homerun with this investment. I’m pretty sure it’s not worth hundreds or thousands of dollars since there was such a large supply for sports cards from that time period.

Back in May 1997, stock in Amazon debuted at $18 a share. If I had invested $10,000 in Amazon at that time, it would be worth $4.8 million which is a 48,197% return! When I first started investing in the stock market, I wanted to hit a home run. I wanted to buy the next Amazon and become filthy rich. While I was still in high school in 1997, I could have picked up shares of Amazon for pretty cheap after the tech bubble burst in 2000. If only I could go back in time!

In a recent post, I wrote that I am lucky that I’m a bad stock picker, because if I had hit a couple of homeruns, I’d be more incline to disregard index investing and swing for the fences. When I was in my investing infancy, I didn’t want stocks that were well established and growing slowly. Sure, in the back of my mind, I knew that slow and steady wins the race. The tortoise beats the hare, right? But I was young and impatient. An annual 10 percent return on my measly $1000 stock portfolio would result in a $100 increase. That amount of money is not game-changing. I wanted to buy a hot stock that would triple, quadruple, and continue skyrocketing. Not only was I picking individual stocks, I was focused on cheap stocks in industries that had a chance of growing enormously like in tech and biotech.

Fortunately, even though I was swinging for the fences, I was still pretty risk averse and hated to part with my money. I could only bare to put my excess cash into investing this way. This was after contributing to my retirement plans and saving an emergency fund. I was probably better off increasing my retirement contributions rather than picking individual stocks, but when you’re young, retirement seems so far away. I figured my savings rate was sufficient so I set aside some money to try to hit a homerun.

Now that I’m older and more experienced, I have realize that consistently hitting singles is better than always trying to hit a homerun. Many homerun hitters often strike out a lot. I didn’t want to live with the feast or famine, boom and bust mindset. However, even with the knowledge that I’ve attained, I do like to try and swing for the fences now and again. It is almost like setting aside money to blow on something fun so you don’t feel like you are depriving yourself. Some investors need fun money to blow on investments otherwise it might drive them nuts. If I didn’t have the outlet to “invest” money in things that are a little riskier but have the potential for higher returns, I might be more inclined to tinker with my portfolio too much. It is hard to leave it alone as I often want to optimize.

When I read personal finance blogs, I feel like many of them are ultra-disciplined and just put ALL their money in passive index funds. Is it just me that has this urge to hit a homerun? What do you do to keep yourself from taking too much risk in your investments? How much of your portfolio do you keep in individual stocks or other alternative investments which are more speculative?

16 thoughts on “The Urge to Swing for the Fences

    1. livingrichcheaply@gmail.com Post author

      Yea, I’m a play it safe kind of person too, so I just put a small amount in riskier investments. The impatient side of me can help himself!

      Reply
    1. livingrichcheaply@gmail.com Post author

      Yes, slow and steady wins the race but if that hare wasn’t overconfident and took a break, he coulda shoulda won! LOL. You’re right, that’s why I only use a small amount of money to play with.

      Reply
  1. Amanda @ centsiblyrich

    When I was a teenager, my parents bought life insurance for me (whole life). When that company went public in my 20s, I automatically received 108 shares (free). Even though I cancelled the policy years ago (in favor of a term policy), I have retained the shares and have seen steady growth. Really, the only reason I hang on to them is I haven’t taken the time to sell them (plus, taxes). I do believe this is the year I will finally sell them. Other than this stock, we are invested in mostly index funds.
    Amanda @ centsiblyrich recently posted…An inside look at how we manage moneyMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      I’ve kept old investments too. Sometimes it’s easier to keep the status quo. I’m also trying to consolidate some of my investments and get rid of some that don’t make sense anymore.

      Reply
  2. Tim Kim @ Tub of Cash

    I’m fairly conservative. But I get the itch sometimes. I lost $20K screwing around with coffee futures in 2015. I’m a big believer in index funds. But I think it’s ok to have 5% or so in “play money.” You can use this allocation to try to hit it rich. If you lose the 5%, it’s no biggie. But potentially you can hit a big home run and find the next amazon. I think it’s going to be some sort of AI company that’ll be the next big one.

    Reply
    1. livingrichcheaply@gmail.com Post author

      Same here. I assumed everyone got that itch. Sorry to hear about the $20k. The experts at the Bogleheads forum also say that 5% is a good amount for play money. AI definitely sounds like the next big thing.

      Reply
  3. Financial Coach Brad

    I think it’s normal for us to feel the urge to swing for the fences. In fact, many people even act on it. That’s a large part of the reason that investOR returns are about 2% lower than investMENT returns. Slow and steady seems more likely to run the race. Professional stock pickers (money managers for funds too) have only beat indexes 8% of the time over the past 15 trailing years. If the pros can’t do it, the rest of us probably can’t either (or at least only a small percent).

    I own TSLA and APPL. Other than that the rest of our money is in index ETFs. On those two stocks I’ve already sold enough of them to get my original money back, so the idea is to “let it ride” for the small remaining amount.
    Financial Coach Brad recently posted…5 Steps to Help Your Child Avoid Student Loan DebtMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Exactly! Most people want to swing for the fences which is why they tinker so much and can’t stand to just buy and hold. TSLA and APPL are great stocks with potential, and I see you’ve already done well since you were able to sell enough to get your money back. The rest is just gravy and I don’t see those stocks crashing and burning.

      Reply
  4. Laurie @thefrugalfarmer

    I am totally risk averse, but am working on it. I hate that the market is so high right now and am convinced it’s going to crash, and then I’ll buy. That’s my plan. But I also said that when it hit 10,000 back in the 90’s. I think I’d better just stick with real estate. :-)

    Reply
    1. livingrichcheaply@gmail.com Post author

      It’s good to be a little risk averse sometimes! I’ve been thinking the same thing about the market…though I’ve been thinking that for a few years already.

      Reply
  5. Mustard Seed Money

    I wish I had invested in stocks instead of baseball cards when I was younger as well. I have a ton of worthless cards thinking they’d be investments and some blue chips stocks like Disney from back then would definitely have served me well :) Oh well…hopefully I can teach my kiddos.
    Mustard Seed Money recently posted…When Will You Reach Retirement?My Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Didn’t you say you had a Mickey Mantle card or something, but it was lost when you moved or parents moved? My parents didn’t buy blue chip stocks for me but they did invest in a mutual fund. That served me well and I hope to do something similar for my kids.

      Reply
  6. DC @ Young Adult Money

    I’m always open to hearing about new investment ideas, but typically what I’m looking for is not a stock but some sort of business plan or idea that has upside potential. I would say I’m not risk averse in that sense as I’m willing to throw thousands at those ideas and, if I went “all in” on an idea, potentially much more than that. I think for most people a passive, risk averse strategy to stocks and investing is ideal. I do dream of selling a startup for millions and then investing in startups – which obviously is super risky!

    Reply
    1. livingrichcheaply@gmail.com Post author

      You are an entrepreneur! That’s great to try and start your own businesses and it’s always good to invest in yourself. Investing in startups is indeed risky.

      Reply

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