There is an almost endless amount of financial sites on the internet and if you are a small investor just like me, it may become a bit overwhelming to filter the stuff that really matters.
I’ve been stupid, I lost most of the little money I had saved during the previous years in the dotcom bubble in 2000, and I lost it again in 2008 with the financial crisis. The first time I was young, unexperienced and too enthousiastic. The second time I was uninformed and started to question the whole system and my strategy. I started to read a lot about the way our financial system works and how we are fooled by the media and how we even fool ourselves. We can never know what is going on behind the political curtains but it helps a lot to question everything and have a look at what bankers or politicians are doing and not just saying.
I’m older now, I’m still not a genius but I learned a few general things by falling and getting up again:
- Working and being creative is the best way to make money. If you’re good at something, start a small company. Yes, you could easily make 1 million starting with 1000 all without working, if you were clever enough to buy bitcoin before the hype and sell it all at the top, but nobody has a crystal Harry Potter ball except for liars. And you can’t know for sure who the next Amazon or Google will be. Your skills however are your most valuable asset, nobody can take that away from you.
- As a small investor you can only try to keep your purchasing power and you don’t have the knowledge and tools of the big guys. But at least, that is something and much better already than being a sheep being driven in the direction your banker and political leaders wants you to move in order to be slaughtered like 90% of the people.
- When I was young I thougth I knew a lot, now I just know there is a lot I don’t know, and I try to listen to people that challenge my cognitive dissonance. You need a plan but you should not be too confident either and always question yourself.
- ‘Be fearful when others are greedy and greedy when others are fearful’, is one of the best quotes ever (Warren Buffett). This is so true. Funny thing is however most people will agree but almost nobody will apply this important rule. We are all too greedy I guess…
- Never join the herd. If you do, you will always lose. But you should not neglect the trends either, that’s the difficult part. Just swimming against the stream may become very painful at some point. You may be right in seeing a trend but lose money when you are too early to jump on another train. However, it’s better to be a little bit stupid before a crash than to be a roast turkey afterwards.
- The problem is nobody can time exactly a top or bottom. Don’t try it.
- Don’t be emotional. Selling in panic when some bad news is coming is often a bad idea, so is buying when some stock keeps going up and you become a so called FOMO victim. It may be a chance to do the opposite.
- Invest in what you understand or at least try to study and be informed very well before you do so. Don’t buy a risky stock just because a friend tells you, when you don’t know anything about it. One mistake can ruin your portfolio. Oh yes, Buffett again.
- A lot of people will tell you to diversify but I’m not so sure about that. Depends on the risks you want to take. If you really believe you are right, you don’t have to.
- Keeping cash is important even if inflation eats away your money and you don’t seem to make any gains. But when stocks go down your loss is double as you lose on the stocks that would be in cash, and as you don’t have anything left to buy when prices are low.
- Sometimes you need to be patient and do nothing. Yes, Jesse Livermore knew that already.