Excel is one of the best places to keep track of your investment portfolio. Yes, there are some cool applications or platforms where you can see even more information than Excel. However, if you are granted some loans or have real estate, you cannot add them to it. This […]Read More
History has shown that 80-95% of investors usually lose money. Thus I want to teach you how to avoid losing money. In my first year, I was down over € 100 what was over 20% of my portfolio. At the end of 2020, I started to look for investments […]Read More
When I started 2 years ago – then my only question is how. Today I see a new investor at Reddit commenting: to the moon etc. But why this stock has to go up – WHY? Does this company revenue make a historical record – no! – then why? Because you all buy this and it makes the domino effect that’s why it goes up. But If half of the buyers get excited about their profit – they start selling this stock and it falls and falls, and you think that it goes to the moon. If you start investing – first of all – learn how to manage risk and then how to make a profit. You just have to read some books, articles, blogs, or watch videos from Youtube.
How I lost 64%?
Before these tips, I want to share my experience with stocks. I started in 2019 and this was my third stock investments. It was a sunny day, I was at work. When we had a lunch break, I read the news – where a company made a tender offer to an Estonian company. My only thought was I buy it with all of my free money. Now, remember that – never invest your savings, college money etc – because you will never know what happens next. When I bought it seconds later I made 20€ unrealized profit. Hours later I was down. Next day down. Three days later my loss grows and grows. My only thought was that this tender offer will help me.
I bought this stock at 0.355€ then it falls to 0.2€. I thought okay tender offer will be higher than that. Nope – tender offer made at 0.1€. And that moment I realised that I was so dumb. What did I expect? Getting rich from the tender offer. Now when I know all this stuff – then why a company wants to buy another company at the highest price – of course, it wants a lower price.
Now after that I always manage risk. How I do that? Very easily I buy a stock at different time, I buy many stocks not only one, I think before I buy something, and I do analysis.
How to start with investing?
When I started back in 2019 I read a lot of books – and you should do that too. Why reading books? – because they are written by people who made their wealthy from investing. They know what they are talking about, they know what is good and what’s not, they know what to do when things go bad, they have over 10 years experience and you only a few days or months. If you start with investing then you should know the name Warren Buffet – if not then read about him. Do not trust WSB or these YOLO investors. Yes, they make money – and if things go bad – what they are going to do. Comment everywhere to the moon and that’s it. Yes, today’s stock market is not like back in the 19’s, but it sounds like dot.com hype. Everyone buys dot.com stocks. Some of them are still alive, but many of them went bankrupt.
If you want to make a lot of money then start slow. You have to read about risk, cutting losses, how and when to take out a profit, and how and when to buy. If you know all of them then you are professional – I’m not. But I know how to buy – maybe even how to buy. But I don’t know how and when is the time to take out a profit. And I know something about risk management, but not enough because my diversify is really bad. Cutting losses is one of my weakest side.
Above you see some of these books that you HAVE to read. And you can see that these books do not cost much. But this knowledge what you got there – these are priceless. If you make a 10% profit from the stock market and you think you are good then you have to read the fourth book. If you want to learn how these things work then the first book will teach you.
Every beginner think that buying penny stock or Tesla or GameStop – “these stocks will make me rich”. They will never do that if you do not know how to manage your risk and you don’t know how to buy and sell. Risk management helps you to not lose money and if you lose then this will not be over 5 or 10 per cent.
TIP 1: Stop-loss
First step is that if you found a stock and want to buy it then think about how much it can fall – maximum is 100%, but think about what news will bring this stock down and try to find a spot from graph where it fall a much and tray to find out why. Then you know what news is bad for this company. Now second step is that learn about stop loss. If are done the first step and find out that some bad news will bring this stock down 7% then I would put stop loss at 8-9 percent, because it can go up again, and if not then you took 8-9 % loss. But sometimes stop loss will ruin your entire investment, because it can go down 9% and at the end of day it can be 10% up. And this is the only reason why I don’t use stop loss.
TIP 2: Divesify
You can diversify your investments in many ways. First and the easiest – buy fund or ETF. Second is easy too – you just have to buy a lot of stocks – make your own fund. In my portfolio, you can find 7 different stocks, 4 different crowdfunded project and 7 different cryptocurrencies. A quite diversified portfolio, but this does not mean it is. Because I hold Change Invest and it makes over 55% of my portfolio. I know this is bad, but I try to add more money into my “fund” to take this level down.
One of the best ways to learn how to build up your own fund is by reading John Bogle books, It is the sixth book from the list above. He was the founder of The Vanguard Group and he knows how to do it properly.
TIP 3: How to buy?
In this topic, I don’t teach how to use your bank or Robinhood app. I want to talk about the analysis here. When I started I have always one question in my mind – when is the right time to buy. When I made my first investments in the stock market, I bought Merko Ehitus at 10.10€ after two weeks it falls nearly 10%. I was shocked – why? – reading the news I found out that it will pay me a dividend. Put I have made investments like Plug Power what is nearly 50% down, but I don’t care, because I am going to buy it from the dip. But the question is not about what is my strategy – the question is when I will buy it.
To find that out you have to learn fundamental and technical analysis or one of them. In my first year, I made every decision by technical analysis, but now I learn about fundamental analysis at university. I’m not saying that I’m good at technical analysis, but over 90% of my investments have raised after buying them. But as I said before about taking out a profit. It is not one of my strongest sides. I wait and wait until it going red and then I’m looking chances how to buy from the dip.
TIP 4: How to sell?
As I said before I am not good at taking a profit. But I know when I should take it out – I just don’t to it. I have learned technical analysis for almost two years and I have learned something – how to use MACD, RSI, MA lines, and so on, but I have not learned about taking out my profit. If you want to be a trader then you have to invest with zero emotion, but I have some kind of hope for getting more profit – although I invest with almost zero emotion. And if you are able to do that then you can make money with it. HOPE is not good at trading – this will ruin all your investments. If your plan was to get at least 2,5% profit then take it out when it is over that or at this point if you think this will keep going up then sell half of your position – maybe it will go up.
TIP 5: Buy and hold
This is the only and almost guaranteed way of getting rich in future. The only thing you have to is – buy regularly, reinvest all the dividends, and wait. And how to diversify with this strategy – easy. Find an ETF that follows the S&P500 index and buy it monthly or weekly. This allows you to average your buying price, and remember to reinvest every dividend.
TIP 6: Strategy
If you want to be successful in investing then you have to find out your strategy. Why it is important to have it? This is because it helps you to invest with zero emotion. Think about long-term investors – they buy because they think it will be worth a lot more in future, but what they are going to do when it falls one week straight – nothing. Because they are long-term investor, who doesn’t care about these red weeks or days.
If you choose to be a trader then you should watch your position carefully, because you don’t want to lose money for one week straight. Your only mission is making money daily.
You can choose an asset-based strategy: fund, ETF, dividend stocks, growth stocks, cryptocurrencies, real estate, or combined of them. This strategy is based on a diversified portfolio, which brings risk down and this also makes a lower return.
Making passive income from interest and dividend is one of the easiest ways to get rich. By reinvesting them, there will be a compound interest that is supposed to be the eighth wonder of the world. And this will make your portfolio to grow exponentially.
In the bottom line
Investing is the easiest part of this game, but getting to know these things is the hardest part. It took me one year – I read books, articles watch youtube videos, and read blogs every single day. It took me at least 3-4 hours a day and now in 2021, my portfolio return is 81%. This means I almost have doubled my money. Be patient and start today.
“An investment in knowledge pays the best interest.”Benjamin Franklin