Key Points
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Selling AMD at a 33% gain in 2004 felt like skill, but the stock would have soared from $15 to $500 per stub in 22 years.
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Owning one bank, one carmaker, and one oil company is not diversification if you can’t explain any of their businesses.
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Time and compounding do most of the work, and the holding period matters more than the ticker.
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There is a TD Ameritrade statement in my office from the mid-2000s that I keep meaning to throw away. I found it again last week. Instead of tossing it, I read the whole thing.
I was 29 in 2004 and buying stocks in whatever amounts I could scrape together. I grabbed 10 shares of Advanced Micro Devices (NASDAQ: AMD) at about $15 each. People made fun of this buy around the water cooler, because Intel would surely crush the smaller challenger like a bug. I got out at $20 with a 33% gain in six months!
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But because the $150 trade worked, I learned the wrong lesson from it. Then I applied that misunderstanding dozens of times in the next couple of years. With a long-term mindset, that modest $150 AMD investment would be worth $5,000 as of Sept. 10, 2026 (despite spending a decade underwater).
The hall of fame nobody visits
There were tons of misfires. Movie Gallery rented videos in a decade that was actively canceling the concept of renting videos. Advance Nanotech and Harris & Harris looked great because in 2005, “nanotech” did to me what “AI” does to people now. Most of the poor investments are lost to the sands of time, saved statements notwithstanding.
Then there was my diversification phase, and I want to be precise about how dumb this was. For a couple of years, I decided that diversification meant owning one company each from a bunch of different industries. A bank, a carmaker, and an oil company would be a good start, even if I didn’t understand their businesses. I just liked that the categories were different.
Somewhere in there, I also tried options and short-selling, which is a bit like taking up recreational chainsaw juggling before you learn to juggle tennis balls. On the upside, I never risked much money in those experiments.
Image source: Getty Images.
The boring answer, which is also the correct one
A few big winners more than made up for all the cash-burning losses.
My best bets were Alphabet, Netflix, and Intuitive Surgical. These picks actually made some fundamental sense. Alphabet’s Google stood out as a durable winner from the start, when WebCrawler and AltaVista still felt modern. I wrote a deep dive on movie rentals in 2006, where Netflix was building distribution while Blockbuster was defending real estate. Intuitive Surgical’s robots produced better patient outcomes than handheld scalpels.
The old me would have taken small profits and moved on. The real takeaway is that I learned to let the winners run for a long time. I still own all three, and each is up 1,000% or more.
Here is the annoying part. I did not need to pick those specific winners. The SPDR S&P 500 (NYSEMKT: SPY) had been sitting there since 1993, available to anyone with a brokerage account and a pulse. If I had just fed $300 per month into an automated SPY investment starting in 2005, that money would be worth about $300,000 today. That’s $75,600 of cash contributions and roughly $220,000 of returns over 21 years. No stock research. No cleverness. Just showing up, including in 2008 and the COVID-19 lockdowns, when it looked like a mistake.
Time and compounding do the heavy lifting. Everything else is decoration. It took me an embarrassingly long time to figure that out, and I have an old paper statement in a drawer to prove it.
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Anders Bylund has positions in Alphabet, Intel, Intuitive Surgical, and Netflix. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Intel, Intuitive Surgical, and Netflix. The Motley Fool has a disclosure policy.
