Turning $3k into $210k via Investing

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From time to time I hear about how so and so turned $1 to $10,000 or $50 to $50 million (alright, never that outlandish) but more often than not you don’t hear how they did it. It’s not that you’re going to copy them (you can’t) or steal their idea (you can’t), it’s that you want another ounce of credibility to the story and the “how” will give it to you. Well, Selena Maranjian, a Motley Fool investment writer, turned a $3,000 investment into $210,000 in about twenty years by doing one thing – buying what she understood and what she knew.

Read the article and let me know what you think.

{ 10 comments, please add your thoughts now! }

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10 Responses to “Turning $3k into $210k via Investing”

  1. Jared Allen says:

    Honest about the greed kicking in. And certainly some good advice. My wife owned Krispy Cream and got out in time for a profit, and I was a huge fan of a little online bookseller named Amazon, but let people talk me out of it’s IPO. Oh well. Mindspring had a good run for years as did Redhat during the Linuz craze. So, what is the difference between this type of investing and fad investing? Is XM and Netflix really where we should be socking our pocket change?

  2. Tim MMF says:

    That idea of buying great companies that you know and use is one of the main points in The Big Money by Frederick Kobrick which I’m reading now. He talks about how he got into McDonald’s and other companies about the same way.

    The same idea of buying what you know led me to purchase Netflix stock. Anyway, it’s a good article and it is very possible to become rich off of one great company.

  3. lauda says:

    This article is only good if you need more reasons not to be a trader, but instead simply invest for the long-term in index funds. The writer can never forecast when the tip is going to be…

  4. While I agree that you should really know a company before you invest in it, I don’t think you should necessarily buy a company just because you know it inside and out. Yeah this is a good example of a person knowing AOL pretty good and thinking that it is a good company and put some money in it and made off like a bandit, but just because you hear this one success story doesn’t mean this is how you should go about investing. Everyone gets lucky once in a while regardless of what their decision making process was when they made a stock purchase, it’s being able to consistently repeat the performance that is the tricky part.

    Jarod’s wife is owning Krispy Kreme is a good example. Krispy Kreme donuts where and are widly popular. Just a few years ago I don’t think anyone would have argued that it was a good business. The business at a high level makes sense, people love these donuts and the company is expanding as fast as Starbucks, but then crap hit the fan and stock price fell through the floor. Now Jarod’s wife could write an article about how investing in the stock market is super dangerous and you’ll lose all your money based on this one experience.

    Don’t get me wrong I’m a huge fan of the Fool and agree with a lot of their mottos, I’m just playing devil’s advocate here and saying 1 example of success isn’t good enough for me to believe that a certain way to invest is better than anything else.

    Too often we here of these success stories and don’t hear nearly enough about the mistakes, which is IMO is where you really learn the most.

  5. jim says:

    Very true, I thought this article was a good read no so much because she turned 3k to 210k but that she talked about it. A lot of people can say the result but hardly any ever go into how they achieved it, that’s where the value is in this article is for me.

  6. samerwriter says:

    Unfortunately these stories are ultimately just anecdotes. There are numerous people who have made lots of money buying companies they don’t know, and numerous people who have lost lots of money buying companies they do know (just ask Enron employees).

    People who make money frequently “fool” (ha ha) themselves into thinking it was because they made a wise decision and knew the company, when they actually just got lucky. For example the author of this company used and liked AOL. Then she makes the mistake of thinking she knows and understands the hugely complex media conglomerate Time Warner.

    So to summarize, the people who lost money don’t write articles (who would listen to them?). The people who made money don’t want to admit they got lucky, so they claim it’s because they “knew” the company.

  7. jim says:

    Herb – I agree with you about the Fool and their constant peddling of their products, if you ever make the mistake of signing up for their trial membership just to read some bboard then you can probably expected “come back!” emails every single day for about three years.

    And it’s true, this tells us nothing about how you should trade and yes, Samerwriter, she did get luck as many people did riding the dot-com rise (and fall); but there are a few useful bits in there such as knowing the company you’re investing in.

  8. Herb says:

    See how they snuck in a reference to their newsletters at the end there? I used to check out the Fool fairly often and even have one of their books, but they seem to have devolved in the last couple of years.

    On the investing front, this really tells us nothing. She got lucky; buying a company that she really had no insight into during the greatest bull market possibly ever… As someone else said, Krispy Kreme is a great idea and was a great stock until management got creative with the accounting… W/o having knolwedge of management and comptetitors (at the least), its all just luck; hope that someone in the future will buy the shares from you for more than you paid.

  9. Phil says:

    That’s about a 21.5% average annualized return. That’s a nice return, but the real question is: is the combination of systematic and non-systematic risk appropriate for the return she got?

  10. Steve says:

    A very good return. All she was risking though was $3000…which especially in retrospect was a good deal for her.

    Personally I think you need a mix of good old boring index funds and a few more speculative investments. The index funds are reliable and will get you to a pretty well known destination but the speculation is what keeps things interesting.

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