Boom and bust

One of my smartest investments was in America Online’s stock. I bought 500 shares at $100 each in 1998, and within less than a year, it had soared. I thought things would only get better, and watched in amazement as the stock fell. I then did what you’re not supposed to do — I panicked and sold. Still, I reaped a big profit in just 6 months. If I’d sold earlier, I’d have netted much more. (Isn’t hindsight wonderful?) The episode taught me that you need to grit your teeth and hold through volatility. It also taught me that you can’t time the market.

— J.S., Australia

THE FOOL RESPONDS >> America Online made many people a lot of money during the dotcom boom, but not all great businesses stay great.

America Online was the U.S.’ biggest internet provider in 2000, valued at $125 billion, but that was before the internet bubble burst. It ended up joining with Time Warner in what would later be seen as one of the biggest merger failures ever. In 2015, AOL was acquired by Verizon Communications for about $4.4 billion.

It’s smart to hang on to stocks that you believe in during volatile periods — but you need to know why a stock is falling, and sell if it ever becomes wildly overvalued. Many stocks plunged during the dot-com crash simply because they had been bid up too high in a speculative frenzy.