Have you ever thought of investing in the stock market but didn't know where to start?
Did you just watch a TikTok advising you to put your life savings in Dogecoin but not sure if that was the right decision?
Have you spent your life selling Yu-Gi-Oh cards for 236% margins but are now looking to diversify your investment portfolio?
For me, it all first started in high scool when my tutor David talked about having shares in Commonwealth Bank that "went to the moon". Then, in my first year of university, my accounting tutor talked about how Telstra shares and their dividends and why investing long term was so important. Fast forward eight years later, I am now a seasoned veteran on the Titanic of the stock market. I have navigated through the spicy cough crash and ridden the wave of recovery (both physically and figuratively). Had I have known the things I know now - would I have done things differently? Definitely. Do I regret it? No.
This blog post isn't the be all and end all guide for investment strategies but let me save you 8 years of your life by providing you with the 8 biggest lessons I have learnt in my time investing. Eight years of blood, sweat, and tears (okay, maybe not blood) condensed into eight bloody tips just for you (see what I did there?!).
#1 Just do it ✔
You wouldn't wait until the perfect time to plant a tree, would you? Of course not! The same goes for investing in the stock market. Don't wait for everything to line up perfectly, or you'll be waiting forever. Take that first step and get started.
Here is one reason to start now - One of the most powerful tools in an investor's arsenal is compound interest, which can help grow your investments exponentially over time.
For example, let's say you invested $10,000 at age 30 in a stock that earns a 5% annual return. If you leave that money invested for 35 years until age 65, your investment would have grown to approximately $43,000 thanks to the power of compound interest. But if you wait until age 40 to invest that same $10,000, you'll have missed out on ten years of growth, and your investment would only be worth around $26,000 by age 65.
This example highlights the importance of getting started as early as possible in your investment journey. By taking advantage of the power of compound interest and allowing your investments to grow over time, you can potentially earn substantial returns and build wealth for the long term.
For those who are new to the journey, the advice I give to my close friends and family to is create a CommSec pocket account (really easy if you bank with Commonwealth) #notsponsored. The app is really intuitive and gives you 7 ETF's to choose from. It allows you to invest in a range of companies and it has low brokerage fees. Think about it as adding more into your super!
#2 Do it small 🤏
So now you have created a brokerage account, how much do you put in?
...How much are you willing to lose?
Don't be afraid to put a little bit of money in the market to see how it moves. But never invest money that you can't afford to lose. Think of it like trying a new dish at a restaurant. You wouldn't order a huge portion of something you've never tried before. You'd start with a small portion to see if you like it. The same goes for investing.
#3 Learn on the job (how hard can it be?) 👨🎓
When I first started investing, I was intimidated by the complexity of the market and the wide range of investment options available. I spent a lot of time researching and learning all the different stock analysis techniques under the sun. I spent thousands of dollars on a system that could do fancy things like "technical analysis" and "backtesting". I even became a rice trader, looking to buy and sell stocks based off signals like "Three black crows" and "hanging man" (Seriously!🤣). But the truth is, no amount of research and analysis can fully prepare you for the unpredictable nature of the market.
It's natural to want to know everything about the stock market before you start investing. But the truth is, you'll learn best by doing. As you invest, you'll start to pick up on patterns and trends. You'll learn from your successes and your mistakes.
However for those who want to do some research before hand, this podcast is great for those who want a deeper insight into the market. My strong advice is stay away from the forums... especially from "gurus" who think they can read the future of a stock price...
#4 It's all noise 🔊
In your first month investing – you will tend to check how many dollars and cents you have either made or lost during the day, hour or minute. And often times there is this primal urge to google “why did the stock market go down today” and you will read the same thing over and over again. And the truth I learnt after 8 years is that nearly 99.99% of the time it is just noise.
The stock market can be overwhelming, especially when you're just starting out. You'll hear a lot of noise about why the market is up or down on any given day. But don't get caught up in the hype. Instead, focus on value investing. Look for companies with strong fundamentals (let me know if you want me to write about this!) that are trading at a discount.
#5 Don't follow the hype 🚂
The media and financial publications often hype up certain stocks or industries, which can lead to a lot of FOMO (fear of missing out) among investors. (Did someone say BitConnect?) But just because everyone else is investing in a certain stock or industry doesn't mean you should too. In fact, it's often the contrarian investors who make the most money.
6# Catching "the bottom" 📉
Now that you are more comfortable with buying more stocks, when should you invest again?
You start looking at graphs, and the likely thing you say is "It's too high right now... I'll wait until later", or "It's going down right now, I'll catch the bottom... and wait until later."
It's like trying to catch a falling knife – you're just going to hurt yourself. Don't try to time the market, and you'll save yourself a lot of stress and heartache. Instead try to invest in value and companies you genuinely believe in, try to dollar cost average, definitely better in the long run!
7# Patience is 🔑
Investing is a long game. It's not a get-rich-quick scheme. Don't expect to see big returns in a short amount of time. Instead, focus on building a diversified portfolio of stocks, bonds, and other assets that will perform well over the long term. Think of it like planting a garden. You don't expect to harvest a crop the same day you plant the seeds. It takes time, patience, and nurturing to see the fruits of your labor.
Be prepared for volatility. The stock market is a rollercoaster ride, with lots of ups and downs. Some days your portfolio will be up, and other days it will be down. It's important to be mentally prepared for this volatility and not let it affect your decision-making. Don't panic when the market dips and sell everything. Instead, stay calm and stick to your long-term investment strategy. One of the quotes that I will always remember is that:
"The proof comes from Oppenheimer, who looked at th US market going all the way back to 1950. Over that time, the S&P 500 has NEVER suffered a loss over a 20-year period ."
For those who just start their investing journey, resist the urge to buy and sell on a daily basis, instead try to hold it for at least a year (look into capital gains discount!). I once invested in the Singaporean E-sports scene for a day - do you think I made money in it?
8# Read #1 Again
Investing in the stock market can be both exciting and daunting. Like sailing the high seas - there will be storms and rough waters, but also calm and prosperous times (I have yet to see this but I am trusting the process). The key is to stay the course and keep your eyes on the horizon. Remember to start small, stay focused on the fundamentals, and have patience. And never forget that the most successful investors are those who weather the storms and stay in the game for the long haul.
Just get started and you may just find yourself riding the waves of success.
Disclaimer: Any advice should not be taken as constituting professional advice. Simon Bui Tran is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to suit your unique circumstances. Simon Bui Tran is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.