After Tesla’s share price has surged in the last 12 months, Elon Musk became the world’s richest person on 8thJanuary with a net worth of around $190bn, knocking Amazon’s Jeff Bezos off the top spot for the first time since 2017.
Whilst I’ve bought plenty of things from Amazon, I have only daydreamed of getting a Tesla Model 3, and, to date, never even sat in one!
However, the only thing I’ve bought of Tesla is some shares.
Here’s my story of the psychology of investing:
In October 2017 I wanted to buy £1,000 of Tesla shares in my Stocks & Shares ISA. However, the price was over £250 per share so I only managed to buy a whopping three shares (equivalent to an adjusted $62 per share after the 5:1 share split last year). Not an earth-shattering amount to invest but a dabble, nonetheless.
Within a year the share price fell to around $50, a 20% loss (only on paper, of course) on a company that had yet to even make a profit.
How did I feel?
😈 What kind of bright idea was this? I should sell.
😇 No, actually, I should buy some more because the shares are cheaper.
🤔 I didn’t know what to do so just sat still and did nothing.
The 2020 trading year opened at $88 per share, quickly rose to $180 by late February and then when the coronavirus induced a market panic, fell even quicker to $102 in late March.
🤔 Now what do I do??
😲 Lots of people are panicking but I’m telling clients not to panic, sit still and everything will be alright.
😇 Again, I could have bought or sold but I just sat still and did nothing.
By early September my three shares were converted to 15 (courtesy of the 5:1 split) and they were trading at over $400 per share. I was sat on a 700% gain. I’ve never had anything like that before, thought about it for a few days and decided to take some profits. I sold seven shares at $418 per share (reinvesting into a very boring global equity index fund).
But the rollercoaster kept climbing. By late November my remaining eight shares were sat on a 910% gain… this was crazy… what if Musk tweeted something daft (again) and the shares halved in value??
My thought process:
😲 But, what if they kept going up? I should buy more… how much can I afford?
🥺 But, what if they fall? I should sell. I could lose £1,000 on a careless tweet from Musk…
I sold three more shares at $585 each, reinvesting just as before.
🤯 As I write, Tesla is trading over $800 per share and my remaining five shares are sat on a 1,208% gain… this is psychological torture!!
Today’s thought process:
If only I’d re-mortgaged the house and put it all into Tesla shares… I could have had that Model 3 after all. And it would be free!
But what if I did and they went bankrupt? My wife would think that I was a complete fool and know nothing about investing.
If the shares halve, that’s okay. I have plenty of years ahead of me not to worry too much about that.
But if this was a bigger proportion of my net worth, I am absolutely certain I wouldn’t have kept my nerve this long.
Conclusion: investing is hard if you let your feelings get in the way.