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I have learnt so much over the past decade buying and selling stocks, and i believe there is still a lot to learn, as i continue on my investment journey.
Like with everything, the longer you are in the business of buying and selling stocks, the more lessons you are bound to pick up on the way.
Looking back, i made a lot of costly mistakes and reckless decisions that now seem obviously stupid (ignorant).
You can’t make money in the stock market if you are busy losing money daytrading, option trading with leverage (oh! Margin calls) and FOMO buying.
The golden rules of investing: “Rule No.1 never lose money. Rule No.2 never forget rules no.1” Warren Buffett.
With my experience, I’m dedicated to helping the everyday retail investor/trader become better at not losing money, literally.
Here are 3 things that i learnt from losing money in the stock market:
1. Doubling-down/holding onto losers:
“If it was valued at $200 per share, and currently trading at $100, it’s has a strong chance of doubling” Me years ago.
Never buy stocks simply because they recently tanked and you think that automatically increase their upside. Wrong!
I had a particularly painful experience buying a stock after it went down about 50% from its all-time high.
Three years later, after a series of doubling down (buying more shares), the stock went down 70% from when I first bought. Crazy!
Holding onto a loser with capital that could have been allocated to other trades. Lesson learnt.
Now, if a stock is significantly down I first want to know why. The trick is always in the whys.
It’s important to find out why the company is performing bad and then ascertain if they have the capacity to recover in time.
Is revenue or earnings growth slowing down and why?
Are they facing increased competition or have serious regulatory concerns?
What are the macroeconomic conditions and how does it affect their long term stability and growth trajectory?
As a long-term investor, I try to find out if the stock is down because of short-term concerns and its long-term prospects remains solid.
This informed my decision to double down on Nvidia and Meta last year.
2. Following the crowd (FOMO):
When i started investing in the stock market, my portfolio was filled with trending stocks, I was buying a piece of every stock that was making the rounds.
I quickly learnt that is not the way to go, after losing thousands of dollars really fast.
It’s thanks to this experience that in 2021, when almost every retail investors with an investment/trading account were FOMO-buying stocks like GameStop and AMC, I stayed FAR AWAY and warned about the looming danger. The stock market is not a casino.
I’ve learnt to put my money in companies with a thriving business and not just buy every stock that’s making the rounds.
Say no to impulse buying/selling or feeling pressure to get in on the action. Always remember, you are building wealth for “you (and your family if that applies)”.
Carry out your done diligence, and determine if it’s a business you’d hold long if you have 100% ownership. If you don’t feel okay owing everything, why own a piece of it.
3. No Defined Investment Philosophy/Strategy:
It’s common for retail investors to start investing in the stock market without a clear investment strategy.
I’ve lost a lot of money 💰 trying every trick in the book (day trading, leveraging trading, option trading).
There are things one needs to consider before investing, it’s costly to start buying and selling stocks without a defined strategy.
Adopting a time-proven investment strategy that works for me and sticking to it made all the difference in my investment journey.
Over the years, I stuck to the long-term growth investing strategy through bears and bulls.
In the past five years, our Flagship Service, Market Disruptors, that relies on the same long-term growth strategy have produced an impressive return of 190.86%, which is 4× what the s&p500 returned.
If you’re interested in investing in innovative companies check out our Market Disruptors.
And please, leave a comment. I do love to hear from you about the lessons you’ve learnt losing money in the stock market.
Henry John is a Stock Portfolio Manager that focuses on companies developing cutting-edge technologies.
Keeping track of cutting-edge techs, companies and stocks is what I do almost everyday. And I love it. Whether it’s artificial intelligence, 5g, or autonomous vehicles; I’m all in.
I’m a self-made millionaire who made most of his money investing in technology companies while working in finance.
Yes! I owe it all to tech and finance.