In the mid-90s I got interested in the stock market and had a bit of money to invest so I opened an account with Charles Schwab. Schwab had recently introduced a service called Telebroker, which enabled clients to trade stocks by telephone. One morning in 1995, I asked my wife to buy $2,500 worth of Microsoft stock via Telebroker. You know where this is going, right?
Later that morning, I received a panicky call from my wife, who was close to tears. Instead of buying 2,500 dollars, she’d inadvertently purchased 2,500 shares of Microsoft. At the time, Microsoft was selling at roughly $50 per share so we’d just bet $125,000 on one highly volatile tech stock. Even worse, we had nowhere near that amount of cash in our account but because this was a so-called “margin account” (which meant Schwab extended us an automatic credit line), we’d just borrowed $125,000 to make a wildly speculative purchase.
Of course, we did what any responsible investor would do – we immediately sold the stock. But because it dropped 1⁄8 of a point that day, and due to the normal spread between the buy and sell price, plus sales commissions, the mistake ended up costing us nearly $1,000. It was one of those painful life lessons you learn the hard way.
Since then, I’ve often wondered what would have happened if we’d been bold/crazy enough to “let it ride”. Adjusting for splits, in the five years from 1995 to 2000, Microsoft appreciated by roughly a factor of 10. So, if we’d held onto our investment until January 1, 2000, instead of costing us a thousand dollars, it would have earned us $1.25 million. Although, if we’d held onto it until today, that $1.25 million would have lost half its value. As Bobby Sherman once said, “easy come, easy go”.