Ok, I'll throw in some other advice, since I just got one of my brokerage statements today that just blew me away.
I bought stock in a company (OMDA) a few years ago, when it was $1.06. It was a bargain OTC stock, and I bought 500 shares. Watched up go up to $3 and get stuck there for a few months. Never cashed out, as they had all kinds of plans that "should" have taken this stock through the roof. One day, it jumped to $6 for no reason. I should have sold it there, and taken my $2500 profit. I got greedy and said I'd sell at $10. Then $7. But as quickly as it jumped to $6, it went right back down to the $3 range.
Then it just plummetted when they didn't meet some SEC deadlines. Figured they'd fix this, and took this opportunity to buy ALOT more shares when it fell to $0.33.
Now the stock has been in the toilet ever since. You think the WCOM corruption is bad, this is 1000x worse. It recently traded at $0.01. Didn't think it could get worse, wrote it off for the tax loss and moved on. Got my statement today, and the company did a 1000/1 reverse split! My one account had 1000 shares, and it now has 1 share! Worth $0.012.
This isn't an isolated incident, but probably the worst one I've seen. I got in for an IPO a few years ago, got 100 shares of a company (SNOW) for $11. Spiked to $20 on the opening day, but we were warned that if we tried to flip the stock, I'd be banned from future IPOs for 60 days. So I held. It went back to $10 by the end of the following day. And it started a slow descent into almost nothing. However, this company didn't want to die, so they kept issueing reverse splits. I started losing count. I now own 5 shares of the company, and it's worth $8.
So let's do the math.
OMDA: $2000 -> $0.012
SNOW: $1100 -> $8
WCOM: $1975 -> $7
VUSA: $8000 -> $0.01
And there's alot more uglyness in my portfolio. (Cisco, Microsoft, Applied Materials, Amazon, Broadvision, GlaxoSmithKline, Motorola, etc) It's been a crazy few years. Had I never gotten into the market, I could have paid cash for my home. Instead, I have a 20 year mortgage and a pitiful portfolio.
It starts small, but consumes you like a gambling addiction, because essentially that's what it is. Especially when you start making money. (I made over $3K in my first few weeks of trading and thought I was invincible - Made a ton trading PCLN (Priceline.com), and eventually sold it at $92/sh. Funny how it's a $3 stock now) Expensive life lesson learned.
