I've been investing for 20 years.
Here are 10 expensive lessons I had to learn the hard way:
Here are 10 expensive lessons I had to learn the hard way:
1: You don't need leverage
Margin & options are fun on the way up but BRUTAL on the way down.
I’ve lost more than 100% on investments before. Why? Leverage!
Margin & options are fun on the way up but BRUTAL on the way down.
I’ve lost more than 100% on investments before. Why? Leverage!
2: Optimize for longevity, not upside
Compound interest is the most powerful wealth-building force that exists.
But it only works if you SURVIVE long enough for it to work.
I used to optimize for upside potential. Now, I use the barbell method to optimize for longevity.
Compound interest is the most powerful wealth-building force that exists.
But it only works if you SURVIVE long enough for it to work.
I used to optimize for upside potential. Now, I use the barbell method to optimize for longevity.
3: High conviction DOES NOT = correct
I convinced myself several times that a specific stock could only go up.
I was right on some. On others, I lost 70%+ (!!)
Conviction is useful, but just because you think you are right doesn’t mean you are right.
I convinced myself several times that a specific stock could only go up.
I was right on some. On others, I lost 70%+ (!!)
Conviction is useful, but just because you think you are right doesn’t mean you are right.
4: Stock prices & business results are 0% correlated in the short-term and 100% correlated in the long-term
I’ve sold future mega-winners just because their stocks were down (dumb). I was watching the stock, not the business.
Now, I do the reverse.
I’ve sold future mega-winners just because their stocks were down (dumb). I was watching the stock, not the business.
Now, I do the reverse.
5: Not having a system
I used to try to keep everything in my head, which was mentally taxing (and dumb).
I didn't use checklists, journals, or watchlists, which are invaluable free tools.
Now, I do.
I used to try to keep everything in my head, which was mentally taxing (and dumb).
I didn't use checklists, journals, or watchlists, which are invaluable free tools.
Now, I do.
6: Not understanding the P/E ratio
I passed on high p/e ratio stocks (that went up).
I bought low p/e ratio stocks (that went down).
Why? I didn’t understand WHEN the P/E ratio is useful.
Now, I know that it only works in phases 4/5, and it's useless in phases 1, 2, 3, & 6
I passed on high p/e ratio stocks (that went up).
I bought low p/e ratio stocks (that went down).
Why? I didn’t understand WHEN the P/E ratio is useful.
Now, I know that it only works in phases 4/5, and it's useless in phases 1, 2, 3, & 6
7: Panic selling and panic buying
My emotions have caused me to panic buy hype stocks and panic sell future mega-winners.
It’s easy to say you’ll be greedy when others are fearful, and visa-versa. It’s damn hard to actually do it.
My emotions have caused me to panic buy hype stocks and panic sell future mega-winners.
It’s easy to say you’ll be greedy when others are fearful, and visa-versa. It’s damn hard to actually do it.
8: I didn't study history
Human nature is remarkably consistent.
The same forces that drove markets 100+ years ago still exist today.
There’s always a smart-sounded reason to sell. I didn't understand that. Now, I do.
Human nature is remarkably consistent.
The same forces that drove markets 100+ years ago still exist today.
There’s always a smart-sounded reason to sell. I didn't understand that. Now, I do.
9: I focused on what I couldn't control
I used to follow the news closely, watching for clues to predict the market.
This was time poorly spent. Macro factors matter, but I have no control over them.
I now focus far more on what I can control.
I used to follow the news closely, watching for clues to predict the market.
This was time poorly spent. Macro factors matter, but I have no control over them.
I now focus far more on what I can control.
10: Not changing my mind
This one is REALLY hard, but it’s necessary to do well.
Changing your mind is hard. Admitting you're wrong is hard.
But,as @JeffBezos said:
This one is REALLY hard, but it’s necessary to do well.
Changing your mind is hard. Admitting you're wrong is hard.
But,as @JeffBezos said:
@JeffBezos Want to learn from my mistakes?
Join me in May for my live course - Valuation Explained Simply.
I'll break down the nuance of how businesses are valued throughout the business growth cycle.
Interested? DM me for a coupon code
maven.com
Join me in May for my live course - Valuation Explained Simply.
I'll break down the nuance of how businesses are valued throughout the business growth cycle.
Interested? DM me for a coupon code
maven.com
@JeffBezos If you invest, you're going to be wrong — a lot!
Don't beat yourself up. That's just how you get better.
Saving money is hard. Investing is hard. The world is complex.
Invest & stay optimistic anyway.
Don't beat yourself up. That's just how you get better.
Saving money is hard. Investing is hard. The world is complex.
Invest & stay optimistic anyway.
@JeffBezos If you enjoyed this thread, follow me @BrianFeroldi.
I demystify the stock market.
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