A little thank you to Warren Buffet

[Rain Man]

Originally Posted by DaKCMan AP

Are the returns listed the return on the 20% non-principal investment (i.e. what you left in there after pulling out your principal)? Do they include the original 20% gain or are they the performance after the initial 20% return?

The figures I show would include the original 20% gain. So as an example...

I buy 50 shares of a stock at $100 for $5,000.
It goes up 20% to $120 and $6,000.
I sell 42 shares at $120 to get my $5,040 back (roughly), and still have 8 shares that are worth $960.
I then let those 8 shares ride. If I report a 30% gain, it's 30% over what I originally paid, or $130. So at a 30% gain, those 8 shares are worth $1,040.

And of course there are some sale fees and stuff.

Originally Posted by DaKCMan AP

At what point did you double-down?

I've doubled down on a few stocks. Because I've held most of them for a while, I get a feel for when they seem to be priced low. I did great on the stock for a financial services firm after the crash because I only had my profit in it, so it didn't destroy me when that $1,000 lost 90% of it's value. I looked at the company and it was still doing well, so I bought it three more times on the rebound back up.

I've also bought Carnival when it tanked after the Costa ship problem. I already had the stock, so it seemed like it got hit too hard. I've done it with a couple of other stocks that way too, when they got bad news.

The only double-down I've whiffed on was General Electric. I initially bought it and it tanked 20% and I doubled down, but I didn't know the stock well enough. It then dropped another 20% and has been vexing me ever since.

I should note too that a key part of my strategy is to get dividend-paying stocks, too. If I do that, I see three outcomes:

1. The stock goes up 20% and I implement my system.
2. The stock is stagnant, in which case I still get a 2 or 3 percent return.
3. The stock tanks, in which case I'm hosed anyway, but the dividend at least helps me slowly recover my losses.