Gambling is something that has been a part of my life since I was a teenager. I grew up five miles from a Native American casino near my hometown. My parents like to gamble. My sibling lives in Las Vegas and I fully admit I have gambled a time or two.
However, gambling is not necessarily a silver bullet. I don’t get why good people plunk down money to buy lottery tickets or put oodles of money into slot machines. I mean if that’s what you want to do that is great, but I do think that, in general, it is a waste of money and I don’t gamble very often (maybe once or twice a year if that).
Yet while I was away at a conference I took a bit of a gamble. Last week’s Friday Financial Tip was to invest in index funds. I still fully believe that. I own index funds and in fact a good chunk of my money is in index funds. Yet Friday I took a gamble. It was a calculated gamble and not a very large one, but a gamble nonetheless that could pay off big into the long-run.
Last week, I invested in an individual stock for the first time in a long-time. Specifically, I bought shares of the National Bank of Greece (NRB) which was selling for about $1.20 a share. One of my former students made me aware of NRB when he linked an article from Marketwatch (one of my favorite) sites about Greek stocks.
Everyone knows that Greece, as an economy, is in the toilet. And because of this their stock market has gotten battered. After looking at the past performance of the bank (at one time it sold for $700 a share) I decided to plunk down a few hundred dollars and buy some shares of NRB.
Now you can certainly call me crazy for doing this. I think it is a little crazy. But here is my rationale.
1) I can afford it. I had this money in my Roth IRA in cash that was doing nothing. The amount of money invested, while it bought a lot of shares, is actually about .2 of my portfolio (if not less than that). So if I lose it all it won’t make much difference. I loose more than that in my every day portfolio if they stock market is down 1/2 of percent. So it really isn’t that bad.
2) This could pay off big. I mean if the stock just grows to half of what it was at the peak it will be worth tens, if not hundreds of thousands, of dollars. I have always kicked myself that I didn’t invest in Google or Facebook when they had their IPOs. If I had done that then I would’ve been sitting a lot prettier right now. So this was a risk I wanted to take.
3) Sometimes taking a calculated risk is a good thing. I am not stupid. I know that there is a good chance that this will go south. But I am in this for the long-haul, like at least 10 years then I will either sell it or it will be worth toilet paper. So be it. It is something that could really help my family in the future so why not. But I didn’t take this risk just on a whim I actually investigated this for about an hour or so before I pulled the trigger. I read articles and reports on the situation and I took the risk. Let’s see if it will pay off.
The Bottom Line
I am not advocating that you buy this stock. I will always advocate that you should save and invest. If you were to do this make it is a very SMALL part of your portfolio. Like I only spent a few hundred bucks and I am not going to spend any more. All of the rest of my money goes into normal investments. I am the tortoise and I shall win the race, but every once a while a new pair of sneakers may help my pace just a bit.