Around the time I was putting together an asset allocation plan based on distribution and indexes I also decided to speculate with a small amount of money. I wanted to invest in something I was familiar with, so I invested in Shanda Interactive - an online entertainment provider in China.
Shortly after buying in at 35.50 per share in June two years ago I saw it rise to almost 40 then plummet by September to under 20. Apparently the insitutional investors could liquidate their holdings in late August. the flooded the market and drove down the price.
Around the same time SNDA changed their pricing model from fee for time to free to play with in game upgrades. People could play and choose to spend money on additional services. Good idea, but one that takes a long time to insert into the market place. Shanda took quite a hit on revenue and profitability.
Earlier this summer I saw Shanda rising up, knowing that it was volatile I put a sell order limit $35. A few days ago it crossed the limit briefly an then dropped down to low 30s. After two years I unloaded my position for a $900 loss, however I made back a large percentage of what i lost.
I had a friend who actually sold covered calls on the way down, making up a good amount of his loss, however, that's a trading technique I have yet to master.
In the end, I'm not so interested in trading, but I certainly learned a lesson about the vagaries of knowledge and unpreparedness the general public truely is.
I'll be sticking with a diversified portfolio of passive investments.
Actually, I should contact the financial advisor and pick up where we left, despite my discomfort with our current cash flow.