Unlike people who blow their inheritance by spending it, this young student decided to invest and make his parents proud.
On Thursday 1 August 2024 at 17:42, a very confident Sad posted on Reddit’s WallStreetBets forum:
"I bought $700K worth of Intel stock today"
In the post, he explained his reasoning:
- "Q1 2024 is up 9% compared with the previous year"
- "Intel is investing heavily and restructuring by developing a domestic foundry business to manufacture semiconductor chips for third-party companies"
- "Intel positioning itself to become the largest semiconductor manufacturer in the United States is a big deal"
He continued making his case for several more lines before ending with:
"I like this stock and I think it’s really cheap right now :)"
Except things weren’t about to go to plan...
The next day, at 22:47, he posted again:
"OK, I definitely picked the wrong day to buy (update on my $700K Intel YOLO)"
In just over 24 hours, Intel shares had fallen from $30.45 to $21.59, back to their 1997 level. The stock’s worst drop in 50 years.
Sad had lost $203,845, nearly a third of the money he’d invested.
What happened?
Intel released its financial results on 1 August. And they were clearly bad:
- Disappointing quarterly results, with a net loss of $1.6 billion
- A suspension of the dividend from the fourth quarter of 2024
- Plans to cut more than 15% of the workforce
Sad wanted to profit from the decline by buying Intel shares at what he thought was a low price.
Unfortunately for him, the share price kept falling...
What can we learn from this?
Sad ignored several golden rules of investing:
- He didn’t diversify his portfolio and put all his eggs in one basket
- His reasoning was biased and overly optimistic
- He tried to catch a falling knife
One stroke of bad luck, investing on the wrong day, was enough to land him here.
His plan now?
Hold his Intel shares for at least 10 years, waiting for the price to recover.
P.S. Sad is doing OK, but he’s dreading telling his parents.