A years experience from beginner investor

[Init]

So I've come to about a years worth of investing now as a beginner and I must say its a lot more tricky than I had anticipated.

Things I thought were true:

• Good news = stocks will go up
  • In Reality a lot of stocks go up in anticipation of news that is known to be arriving. People then think its not that great and the price falls. Meanwhile you are sitting there thinking what the hell? The company just announced x successful venture and you think that's now worth less?!
  • Companies will try to make all communications sound positive unless things are really bad so its difficult to figure out the OK news from the good news from the HOLY moly news. This wasn't obvious to me at all
• If you are gaining huge profits on a stock, just hang on, it is going to keep going up (this being in relation to penny stocks or similar). I, stupidly, had +100% profit on a stock and let it go because I thought the company had "made it" and was now moving out of the cents per share into 10s of cents. How wrong I was, it took about a day and it dropped by a huge amount again, I never realised those gains. In one instance, my potential 60% profit has turned into a 60% loss.
• If its going bad, it will eventually turn and pick up, after all the share is only selling for cents per share and has had huge upswings before, it will happen again. Well over the course of a year, many never turned around, they just slowly and surely sink into oblivion. You tell yourself every slight uptrend following a long term bear trend is the new bottom from which it will go up again. That turns out to be false more often than not as well.
• Dividends make up for poor investment choice. If i'm earning 6-8% per share as a dividend, who cares what the company does, i'll be getting money. And that money is also like insurance against the share price dropping as well! (so I thought) The share price most often drops by the amount of the dividend and some companies (looking at you TLS) just keep plummeting despite good dividend returns.
• If you are making a decent profit on a share and it looks like its time to sell, only sell if you have waited the year in order to not pay as much tax. I can't believe looking back that I let some good gains go simply because I hadn't owned them for a year yet. I kind of thought that by having a longer term investment that it was more "stable" or have more time to gain profit but I simply let a stupid notion get in the way of realising what I knew to be a good sell.

So there are some thoughts a beginner investor/trader has had over their first year of trading. I have lost a bit, but didn't invest heavily to begin with. Hoping I can learn from mistakes and continue on making better investment choices into the future.
Feel free to tell me how much of an idiot I was, but trial by fire has its merits from a learning perspective

 

[galumay]

Its not what we do right that teaches the best lessons, but what we do wrong.

Your candid focus on things that went wrong will help you get better.

What you will find as you travel further on the journey as an investor is that for most of the points you posted above, there are cases when the opposite is true! The secret is trying to unlock the answer for each specific case.

I still think one of the more important things is to settle on a strategy that suits your personality and world view and then stick to it. I find using a decision journal really helps keep me on track with my strategy - every buy/sell decision I address how it aligns with my strategy in the journal.

Good luck with your future investing!

 

[luutzu]

Its not what we do right that teaches the best lessons, but what we do wrong.

Your candid focus on things that went wrong will help you get better.

What you will find as you travel further on the journey as an investor is that for most of the points you posted above, there are cases when the opposite is true! The secret is trying to unlock the answer for each specific case.

I still think one of the more important things is to settle on a strategy that suits your personality and world view and then stick to it. I find using a decision journal really helps keep me on track with my strategy - every buy/sell decision I address how it aligns with my strategy in the journal.

Good luck with your future investing!

You investing for profit or for fun?

If it's a hobby and money is not the objective, then yea, do what suits your personal "strategy" and world view.

If investing is to make money, the "strategy" is to understand what the heck you're doing.

Whether a business is likely a profitable investment or not doesn't depend on your world view.

 

[tech/a]

Good news = stocks will go up

• In Reality a lot of stocks go up in anticipation of news that is known to be arriving. People then think its not that great and the price falls. Meanwhile you are sitting there thinking what the hell? The company just announced x successful venture and you think that's now worth less?!
• Companies will try to make all communications sound positive unless things are really bad so its difficult to figure out the OK news from the good news from the HOLY moly news. This wasn't obvious to me at all

Buy the rumour sell the fact. Both can be very obvious on a chart.
At the same time one or the other maybe absent. These are what I call catalysts.

• If you are gaining huge profits on a stock, just hang on, it is going to keep going up (this being in relation to penny stocks or similar). I, stupidly, had +100% profit on a stock and let it go because I thought the company had "made it" and was now moving out of the cents per share into 10s of cents. How wrong I was, it took about a day and it dropped by a huge amount again, I never realised those gains. In one instance, my potential 60% profit has turned into a 60% loss.

Like everything there are many who do just this and some who don't. The Chart will also give you indications of when to hold em and when to fold em. Not perfect but I have found perfect enough.
Always move to a Break Even stop as soon as practical (1R return on any trade/investment---)

• If its going bad, it will eventually turn and pick up, after all the share is only selling for cents per share and has had huge upswings before, it will happen again. Well over the course of a year, many never turned around, they just slowly and surely sink into oblivion. You tell yourself every slight uptrend following a long term bear trend is the new bottom from which it will go up again. That turns out to be false more often than not as well.

Falling knife. The temptation is great 5c-10c is 100% and can and does happen in days.--Are you trading or investing!
Two distinct methods with two distinct methodologies.

• Dividends make up for poor investment choice. If i'm earning 6-8% per share as a dividend, who cares what the company does, i'll be getting money. And that money is also like insurance against the share price dropping as well! (so I thought) The share price most often drops by the amount of the dividend and some companies (looking at you TLS) just keep plummeting despite good dividend returns.

Capital appreciation along with dividend is of course ideal. I always have a B/E stop in my trades and Investment.
The aim in BOTH is a better R/R.

• If you are making a decent profit on a share and it looks like its time to sell, only sell if you have waited the year in order to not pay as much tax. I can't believe looking back that I let some good gains go simply because I hadn't owned them for a year yet. I kind of thought that by having a longer term investment that it was more "stable" or have more time to gain profit but I simply let a stupid notion get in the way of realising what I knew to be a good sell

Common Sense---but then again common sense isn't that common.

I still think one of the more important things is to settle on a strategy that suits your personality and world view and then stick to it. I find using a decision journal really helps keep me on track with my strategy - every buy/sell decision I address how it aligns with my strategy in the journal.

I still think one of the more important things is to settle on a strategy that suits your personality and world view and then refine/adjust and monitor it.

As for a journal (1) If your following a strategy A journal is simply a consequence of the method (rules) and in itself meaning less
(2) If discretionary unless you can clearly define why you were right or wrong on a consistent basis the journal will not
be of any use.

 

[galumay]

I knew I could rely on the duck to find a way to disagree with me!

Sorry for posting my thoughts.

 

[tech/a]

I knew I could rely on the duck to find a way to disagree with me!

Sorry for posting my thoughts.

Not a disagreement but refinement based on personal experience.
Just as yours is.

 

[Johny5]

Feel free to tell me how much of an idiot I was, but trial by fire has its merits from a learning perspective

You are definitely not an idiot, you have undertaken a very pragmatic learning process. The next step is to take what you have learned and turn it into profits e.g when you have a +100% profit, take some profit by selling off a portions of your position. Build your strategy/edge and keep improving it as you make more observations about the market, the market has many quirks, i don't think anyone can ever learn them all, but keep up the good work you are well on your way. It took me about three years of trading (mostly day trading) to be able to make a consistent profit, but then I'm a slow learner.

 

[aus_trader]

I commend your honesty and some of the points resonate with me as to how confusing the markets can be.

Don't lose hope as it's a journey and something that is difficult to be successful in a year. There is lots of resources to learn from freely on the web. Also this forum is good place for information. Check out peter2's momentum stock trades and newly created Forex thread. I have learned heaps from these and continue to learn from. I also post 2 portfolios here on ASF:
- Medium/Longer Term Stock Portfolio
- Speculative Stock Portfolio
where I put my own money into stocks and just like you I discuss all the failures and frustrations and the occasional success with a winning stock.

Hope all this helps to shorten your learning curve.

 

[So_Cynical]

So I've come to about a years worth of investing now as a beginner and I must say its a lot more tricky than I had anticipated.

Well summed up, you are now ready to move on to your intermediate stock market investor training, ill give you a 9 out of 10 pass on your first year, please post again next year and let us know how you went.

 

[Wysiwyg]

Investor or speculator? Has "investing" in speculative stocks lead to these results.

 

[cudderbean]

When you are into a substantial profit such as the 100% one you mention, and you don't know where the top is..who does?

1. Lighten your parcel (10-100% you decide) when..
Low<yesterday's Low.

2. Sell the rest when
Low<One*Guppy Countback Line. (or extend Stop Loss to Two*Guppy Countback Line if you are confident this may be only a temporary hiccup)

Works better when Close< the above, but who knows intraday if the low will also be the close. Where's that crystal ball?

This is a simple method that may help you to be cautious at least. Not the Holy Grail of course.

Good luck, mate.

 

[pearcey29]

So I've come to about a years worth of investing now as a beginner and I must say its a lot more tricky than I had anticipated.

Things I thought were true:

• Good news = stocks will go up
  • In Reality a lot of stocks go up in anticipation of news that is known to be arriving. People then think its not that great and the price falls. Meanwhile you are sitting there thinking what the hell? The company just announced x successful venture and you think that's now worth less?!
  • Companies will try to make all communications sound positive unless things are really bad so its difficult to figure out the OK news from the good news from the HOLY moly news. This wasn't obvious to me at all
• If you are gaining huge profits on a stock, just hang on, it is going to keep going up (this being in relation to penny stocks or similar). I, stupidly, had +100% profit on a stock and let it go because I thought the company had "made it" and was now moving out of the cents per share into 10s of cents. How wrong I was, it took about a day and it dropped by a huge amount again, I never realised those gains. In one instance, my potential 60% profit has turned into a 60% loss.
• If its going bad, it will eventually turn and pick up, after all the share is only selling for cents per share and has had huge upswings before, it will happen again. Well over the course of a year, many never turned around, they just slowly and surely sink into oblivion. You tell yourself every slight uptrend following a long term bear trend is the new bottom from which it will go up again. That turns out to be false more often than not as well.
• Dividends make up for poor investment choice. If i'm earning 6-8% per share as a dividend, who cares what the company does, i'll be getting money. And that money is also like insurance against the share price dropping as well! (so I thought) The share price most often drops by the amount of the dividend and some companies (looking at you TLS) just keep plummeting despite good dividend returns.
• If you are making a decent profit on a share and it looks like its time to sell, only sell if you have waited the year in order to not pay as much tax. I can't believe looking back that I let some good gains go simply because I hadn't owned them for a year yet. I kind of thought that by having a longer term investment that it was more "stable" or have more time to gain profit but I simply let a stupid notion get in the way of realising what I knew to be a good sell.

So there are some thoughts a beginner investor/trader has had over their first year of trading. I have lost a bit, but didn't invest heavily to begin with. Hoping I can learn from mistakes and continue on making better investment choices into the future.
Feel free to tell me how much of an idiot I was, but trial by fire has its merits from a learning perspective

Hi, Init I am extremely raw to this about a week into my journey so thanks for sharing your story so far. I must admit I am still trying to figure out what half the LINGO on here means lol but I'll get there. If you don't mind me asking how much $$ did you put into your first investment. For my first trades i brought $1000 of shares in one company and $500 in another small amounts but im still very raw and unsure of what I am doing lol slow and steady..

 

[Init]

I still think one of the more important things is to settle on a strategy that suits your personality and world view and then refine/adjust and monitor it.

As for a journal (1) If your following a strategy A journal is simply a consequence of the method (rules) and in itself meaning less
(2) If discretionary unless you can clearly define why you were right or wrong on a consistent basis the journal will not
be of any use.

This is not directly in relation to this comment but rather some thoughts it provoked that I have had for a while.

The big problem I have with investing is the difference between correlation and causation.
I work in the STEM field and as such I am used to models being demonstrable and testable. Coming from this mind set, I watch and read about other investors who point at charts and find it to be a bit wishy-washy. Chart technicals honestly sound like stories made to fit the plot in hindsight with projections that are rarely brought up again and seriously criticised for being incorrect (just my impression).

It feels as though any strategy you choose to pick is just as good as another since you will simply cherry pick the examples from previous data where that strategy yielded a positive result. If your stock goes up, its because of your strategy, if it goes down it was because your strategy was wrong. It is entirely possible that the stock went up and down without any sort of relation to your strategy and you are simply looking for indicators that aren't there.

So how do you know if your strategy is bogus? Even if the stock goes up with a strategy in place the strategy can still be wrong. Financial success doesn't indicate strategic success in the short term. I would consider strategic success to be something that is repeatable.

The realist in me knows that if there were a mathematical way to show if a strategy was good or not, then that would make a select few very rich or everyone would do it and none would benefit. Perhaps there isn't a pure mathematical approach, but maybe a statistical one. It seems much more likely that with massive data and a means to process it, one could come out on top more often than not (guess that's basically what the big guys do). Unfortunately I don't have a fiber link to the stock exchange nor the ability to process the data so where do I go from here.

I can look at anecdotal evidence of successful (or unsuccessful) people and try to understand what they did and why, but again this falls back to the issue of financial vs strategic success. Given enough players, there will be people lucky enough to have picked a strategy that might not actually be useful but looks convincing because of their success. They will say things like "if you draw this line and look at this trend and refer to a book about investing technical indicators then you can see the three support locations here indicated that it would eventually go up in the next few months... etc" and for THAT time they bought, it worked. I then look at another scenario where the same trend is seen leading up to the projected price hike but the price plummets. This begs the question, how many successfully projected indicators does it take to validate a strategy?

I want so badly to start to learn a systematic approach to stocks but the more I read and watch and the more I think, the more I realise that almost nothing is repeatable and predictable. It just people fitting a model to historic data, minimising the importance of trends that dont fit their views, and speculating in enough vagueness that they aren't wholly wrong, nor are they right.
Should I spend more time on my gut feel, or keep my finger on the pulse of the media machine. Perhaps these are more worthwhile investments when playing this game.

What can I do to improve when I can't even point to a single thing and say this was wrong because that.

 

[Init]

Hi, Init I am extremely raw to this about a week into my journey so thanks for sharing your story so far. I must admit I am still trying to figure out what half the LINGO on here means lol but I'll get there. If you don't mind me asking how much $$ did you put into your first investment. For my first trades i brought $1000 of shares in one company and $500 in another small amounts but im still very raw and unsure of what I am doing lol slow and steady..

I was putting around $500 to $1500 into different companies depending on whether they were speculative vs long term investments.

 

[Zaxon]

For my first trades i brought $1000 of shares in one company and $500 in another small amounts but im still very raw and unsure of what I am doing

Something for you to factor in is the brokerage costs on such small purchases. At, say, $10 for brokerage, on $500 that's 2% costs. Plus another 2% when you sell, so that's 4% you have to cover before you even break even.

 

[tech/a]

This is not directly in relation to this comment but rather some thoughts it provoked that I have had for a while.

The big problem I have with investing is the difference between correlation and causation.
I work in the STEM field and as such I am used to models being demonstrable and testable. Coming from this mind set, I watch and read about other investors who point at charts and find it to be a bit wishy-washy. Chart technicals honestly sound like stories made to fit the plot in hindsight with projections that are rarely brought up again and seriously criticised for being incorrect (just my impression).

It feels as though any strategy you choose to pick is just as good as another since you will simply cherry pick the examples from previous data where that strategy yielded a positive result. If your stock goes up, its because of your strategy, if it goes down it was because your strategy was wrong. It is entirely possible that the stock went up and down without any sort of relation to your strategy and you are simply looking for indicators that aren't there.

So how do you know if your strategy is bogus? Even if the stock goes up with a strategy in place the strategy can still be wrong. Financial success doesn't indicate strategic success in the short term. I would consider strategic success to be something that is repeatable.

The realist in me knows that if there were a mathematical way to show if a strategy was good or not, then that would make a select few very rich or everyone would do it and none would benefit. Perhaps there isn't a pure mathematical approach, but maybe a statistical one. It seems much more likely that with massive data and a means to process it, one could come out on top more often than not (guess that's basically what the big guys do). Unfortunately I don't have a fiber link to the stock exchange nor the ability to process the data so where do I go from here.

I can look at anecdotal evidence of successful (or unsuccessful) people and try to understand what they did and why, but again this falls back to the issue of financial vs strategic success. Given enough players, there will be people lucky enough to have picked a strategy that might not actually be useful but looks convincing because of their success. They will say things like "if you draw this line and look at this trend and refer to a book about investing technical indicators then you can see the three support locations here indicated that it would eventually go up in the next few months... etc" and for THAT time they bought, it worked. I then look at another scenario where the same trend is seen leading up to the projected price hike but the price plummets. This begs the question, how many successfully projected indicators does it take to validate a strategy?

I want so badly to start to learn a systematic approach to stocks but the more I read and watch and the more I think, the more I realise that almost nothing is repeatable and predictable. It just people fitting a model to historic data, minimising the importance of trends that dont fit their views, and speculating in enough vagueness that they aren't wholly wrong, nor are they right.
Should I spend more time on my gut feel, or keep my finger on the pulse of the media machine. Perhaps these are more worthwhile investments when playing this game.

What can I do to improve when I can't even point to a single thing and say this was wrong because that.

Great post .

Will comment when I have more time .
Many have been where you’ve been and
Made the same or similar conclusions.

 

[aus_trader]

This is not directly in relation to this comment but rather some thoughts it provoked that I have had for a while.

The big problem I have with investing is the difference between correlation and causation.
I work in the STEM field and as such I am used to models being demonstrable and testable. Coming from this mind set, I watch and read about other investors who point at charts and find it to be a bit wishy-washy. Chart technicals honestly sound like stories made to fit the plot in hindsight with projections that are rarely brought up again and seriously criticised for being incorrect (just my impression).

It feels as though any strategy you choose to pick is just as good as another since you will simply cherry pick the examples from previous data where that strategy yielded a positive result. If your stock goes up, its because of your strategy, if it goes down it was because your strategy was wrong. It is entirely possible that the stock went up and down without any sort of relation to your strategy and you are simply looking for indicators that aren't there.

So how do you know if your strategy is bogus? Even if the stock goes up with a strategy in place the strategy can still be wrong. Financial success doesn't indicate strategic success in the short term. I would consider strategic success to be something that is repeatable.

The realist in me knows that if there were a mathematical way to show if a strategy was good or not, then that would make a select few very rich or everyone would do it and none would benefit. Perhaps there isn't a pure mathematical approach, but maybe a statistical one. It seems much more likely that with massive data and a means to process it, one could come out on top more often than not (guess that's basically what the big guys do). Unfortunately I don't have a fiber link to the stock exchange nor the ability to process the data so where do I go from here.

I can look at anecdotal evidence of successful (or unsuccessful) people and try to understand what they did and why, but again this falls back to the issue of financial vs strategic success. Given enough players, there will be people lucky enough to have picked a strategy that might not actually be useful but looks convincing because of their success. They will say things like "if you draw this line and look at this trend and refer to a book about investing technical indicators then you can see the three support locations here indicated that it would eventually go up in the next few months... etc" and for THAT time they bought, it worked. I then look at another scenario where the same trend is seen leading up to the projected price hike but the price plummets. This begs the question, how many successfully projected indicators does it take to validate a strategy?

I want so badly to start to learn a systematic approach to stocks but the more I read and watch and the more I think, the more I realise that almost nothing is repeatable and predictable. It just people fitting a model to historic data, minimising the importance of trends that dont fit their views, and speculating in enough vagueness that they aren't wholly wrong, nor are they right.
Should I spend more time on my gut feel, or keep my finger on the pulse of the media machine. Perhaps these are more worthwhile investments when playing this game.

What can I do to improve when I can't even point to a single thing and say this was wrong because that.

A lot of good points you have touched on in this lengthy post. Yes there is a lot of factors to consider and to be successful in the financial markets whether it is stocks, indices, commodities or Forex is not easy.

However I think you shouldn't be discouraged or give up just because the big guys make a few % here and there with their flash trades (called 'High Frequency Trading') by getting their data first and fast with a "fiber link to the stock exchange" as you mentioned. You can trade for the medium to longer term and leave the High Frequency stuff to the BBB(Big Bad Boys).