At Least These are not Parenting Mistakes?
Every parent tells themselves the same thing before their first child comes along:
I HOPE I DON’T F**K SCREW THEM UP.
I know I said it! You dwell on it for months – wondering if the mistakes you inevitably will make will affect your kid. I bet our parents thought the same thing. And look! We turned out alright!
Learn from my mistakes
Here are 5 trading and investment mistakes I made. I share these with you in the hopes that you can learn and not make the sames ones!
1. Trading on Emotions
This one shouldn’t be a surprise. In fact, I wrote a whole post about trading based on your emotions. It’s a big no-no and it’s even more important in a volatile market like we’ve seen this year.
FOMO and investing do not mix.
I was lucky enough to get in some really good deals when the market crashed in March 2020. Over the summer the market continued to climb and I was having some FOMO for one stock. So I bought. You know what happened the next day? Market decided to take a poop (a real stinky one too) and that same stock dropped by 6%. Ca’mon!
2. Making Risky Bets
You should catch that mistake right in the title. Investing is not gambling. If you want that type of excitement, go to a casino.
I made a few risky investments that didn’t pay out. Now some people can argue that if you make enough risky investments, one will pay out and pay out big. That is true but personally, I don’t have the risk appetite to be all-in on risky investments.
Now I didn’t lose my life’s savings. I only invested what I thought would be acceptable to lose. I guess the one important lesson out of this would be to know your risk profile and figure out what investing strategy works for you.
You can take my Investing Risk Profile Questionnaire if you’d like to determine your risk profile.
3. Market Crashes don’t Occur in One Day
This is an interesting one. If you look at the history of stock market crashes, the market usually has a good pull back every 5-7 years. Big, historic market crashes that come with major economic events occur less frequently.
What I’ve also learned is that market crashes don’t happen in one day. It takes time for the market to crash. Let’s take a look at what happened earlier this year during the COVID crash. Here is a chart from Feb 1, 2020 – Apr 30, 2020.
As you can see there were some big dips over that period. The market went down, it went down some more, and went down even more. While you can never time the market, it’s important to know you can never time the bottom either. If you have a stock that you want to invest in, be patient. If the market goes down even further, you can buy the dip or be satisfied that you got in when you did and wait for the rebound.
4. Buying Investments you don’t Understand
I understand the business of every company I own. I might not be an expert in every detail of their business, but I understand how they make money. Their businesses are rather straightforward.
With Wikipedia and Yahoo Finance, you can always read a few paragraphs of what a company does. If you still don’t understand, don’t invest in it. It’s as simple as that.
And if you want something even easier than investing in companies, buy ETFs. There are investments for everyone.
My mistake with this one is coupled with the risky investments. I thought I knew everything about those companies and their situation, which is impossible. You never can.
5. Being Lazy and Not Investing at All
When I was in my late teens and early 20s I had a little bit of savings. I just kept that money in a savings account which at the time I was earning maybe 5% (no way you’d get that rate today!)
I was honestly too lazy to learn about investing. Being lazy cost me years in the market, compounding and potential earnings.
If I had bought Apple (APPL) stock when I graduated university, I would have paid approximately $2.50/share. Today it’s trading at $106/share. And since that time the company has split its shares twice:
4-for-1 on Aug 28, 2020
7-for-1 on Jun 9, 2014
Don’t make my mistakes!
I hope you pick up a few tips from my mistakes. It’s okay to make them, no one is perfect when it comes to investing. So long as you learn from them.
RECEIVE MY STOCK PICKS EVERY MONTH & GET ACCESS TO MY STOCK PORTFOLIO!
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