Investing Lessons I Have Learnt so Far
This week has been particularly exciting for a few reasons but mainly because readers of the blog have reached out to me and actually started trading on their own - doing their own research and starting their portfolios. I thought I would take this article and share some of the investing tips I had to learn the hard way and save you guys the drama.
We’ve all heard the rumours of how investing is so stressful - it's like gambling and the stock market is so risky - you can end up losing all your money very quickly. My tip for you guys is be confident in your investment research and decisions and evaluate the holdings in a few months. Make your trade and then put your phone away. Gains and losses won’t occur instantaneously and you are just giving yourself added stress when you keep checking your holdings to see if it is up or down immediately after opening up a position.
In the grand scheme of things if you are a long only investor (meaning that you plan on holding the stock for a long time) - a difference of a few pennies is not going to make a difference if the stock quadrupoles in ten years. I have seen many young investors (including myself before) spend a lot of time looking at the price of a stock waiting for it to go down by a couple percent before they initiate the position. In Philip Fisher’s book Common Stocks and Uncommon Profits - he addressed this point saying “people can end up waiting for years for the right entry price and miss all upward mobility because they never pulled the trigger - he continued on saying “ in the end a few points will not make a large difference if your gain is reaching four digits. For institutional investors - it is different because they deal in 1000’s of shares so every bit helps.
Like all things figuring out why you want to invest and how you will go about obtaining your returns is equally importing. Investors strategies are listed in their thesis which is basically what their investing strategy it is. It may be dividends, blue-chip, value or growth oriented or plain and simple etf’s. Whatever the strategy make sure you are comfortable with the product and the strategy and you are aware with the good and bad risks and benefits that each one carries.
Finally, and I cannot stress this enough is not to over trade. One of the reasons is the fact that each trade costs money either in the form of a commission or trailing fee with mutual funds (basically a fee they charge you if you usually sell within 90 days of holding the fund). Many young investors constantly switch out of funds either to pocket small gains or hop on another gravy train. It's important to realize gains take consistent returns take time and by investing for the long term you will also benefit from the compounding effect.
Disclaimer: All of the above information is my own personal opinion. Please use caution when making any investment decision. Please do your research and consult with a licensed representative for all money decisions.