Halloween Horror Story: Like Woodford, I Sold Vodafone Group Plc Too Early

We all know the scariest stories are true stories, so gather ’round kiddies as I tell a tale of investing horror that will haunt your dreams and send shivers through your portfolio.

This one comes from my own portfolio, and acts as a cautionary tale to over-eager novice investors.

I had bought my first share, Vodafone (LSE: VOD) (NASDAQ: VOD.US) at around 175p when the price had been relatively stable for a decent period of time, and was more than happy with its 5%+ yield. “All I need to do now is sit tight and watch the money roll in!” I thought to myself. Strike one.

But watching turned out to be my downfall, as I grew impatient. “Where’s the excitement? I have to wait how long to receive my dividend?” As my first stock, I logged on every day to see what gains or falls it had made in the last 24 hours – this was also my undoing. Strike two.

See, I had bought Vodafone on the advice of Motley Fool Share Advisor expert Charly Travers, after he had written it up for the newsletter service. He praised the stock for its valuable 45% ownership of Verizon Wireless, calling it “underappreciated by the market”.

Indeed, at the time the group’s total market cap was rated at £87bn – and no doubt you’ll have heard that Vodafone’s stake in Wireless alone was sold to its joint-venture partner Verizon Communications for around £84bn.

But I was foolish (with a little ‘f’), and didn’t consider that when I saw the share price begin to drop off slightly. Six months after my initial investment, the shares were hovering around 165p – and I had grown impatient. I decided to sell half of my original holding at a loss, in the hope of re-investing it into a more exciting stock. Strike three, I’m out.

Shortly after selling half of my holding, rumours started to circulate that Verizon were interested in buying Vodafone’s stake in Wireless – or even launch a takeover. This sent the shares up; this time, I couldn’t bear to watch, knowing that despite retaining some shares, my knee-jerk decision was costing me every time I saw that green arrow next to the ticker.

We all know what happened next. Six months after I sold half of my holding at 165p per share, Vodafone stock had broken the £2 barrier. And just over two months later, they are currently hovering around 225p.

It’s still painful, but I’ve since learnt my lesson. Before I purchase shares, I make sure I have done enough research into the company to ensure I’m a ‘happy holder’ for the long term. As a result, I’m not worried by any peaks and troughs in line with the market – in fact, I barely glance at the performance of my portfolio more than once a week now, as I’m content with the underlying decisions of my investments — especially that 4.5%+ yield from Vodafone.

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> Sam still owns some shares in Vodafone. The Motley Fool has recommended shares in Vodafone.