My First Trades In E*Trade

I opened an account on E*Trade this year in January. I was 19 years old and a sophomore in college. I was deciding between E*Trade, TD Ameritrade, Zecco, and Charles Schwab & Co. as trading platforms. At first, I was most interested in Zecco because it seemed to have the best deal: only $4.50 per trade versus $8.95 per trade on Schwab and $9.99 per trade on E*Trade and TD Ameritrade. However, a friend recommended E*Trade as having the best investment advice on its website, advice far superior to Zecco’s. Tending to buy quality versus quantity in my daily life and wishing to blame someone other than myself if all failed, I opened an account with $900 on E*Trade. Word of mouth advertising at its best.

Opening an account on E*Trade was surprisingly simple. All I had to do was fill out basic information, provide my Social Security number, and click “Accept” multiple times. A prompt to transfer money from a bank account for free popped up. I did so accordingly and waited a few days for the transaction to be complete.

Now it was time to choose stocks.

The first semester of sophomore year I joined Smart Woman Securities, a not-for-profit organization focused on investment education for undergraduate women. I learned how to make a comprehensive stock pitch with all the relevant sections: Business Overview, Industry Overview, Valuation, Competitor Analysis, Balance Sheet, Income Statement, Statement of Cash Flows, etc. I learned which metrics apply to which industries, and which metrics are relevant to all industries. I learned that ROA is irrelevant in the banking industry and that the Combined Ratio is important for assessing the profitability of a company in the insurance industry.

I had done a pitch on Cree, Inc. for a competition on campus held by Fidelity Investments and was fairly confident in my investment thesis. Cree is a leader in the LED industry, setting the standard for light source efficiency with the xLamp series of LEDs. It had endured the recession, expanded into Taiwan, China, and Brazil at a time when most companies were hesitant to do so, and its largest competitor, a private company out of Japan called Nichia, was wrapped up in law suits. I chose to invest 1/3 of my money in CREE, and 1/3 in VECO (its other competitor).

The last third I invested in JPMorgan (JPM) which turned out to be a bad idea. The stock fell by $8 dollars a share within a week, and after it rose $2 dollars I just sold it. With many years to go, I wanted to invest in something safe, so I chose Intel (INTC), which has remained relatively stable since.

What I loved: becoming an amateur expert on LED stocks. Additionally, I loved watching the market and having a small stake in it. Making a high return on CREE and VECO was not bad either.

What I hated: paying $9.99 per trade. With a tiny portfolio, this was really a pain.

Photo by http://www.flickr.com/photos/partee/ / CC BY-SA 2.0

John Prendergast John Prendergast is the co-founder and CEO of Blueleaf. He serves on the board of WiredTiger, a developer cloud optimized databases. He is also the founder and organizer of the Lean Startup Circle Boston. In addition to his decade and a half as an entrepreneur, John spent nearly a decade as an investment banker and financial advisor.