Don’t be scared of the ups and down. Don’t buy and sell. Don’t get trapped in that stuff. Don’t look at the newspaper every day. – Warren Buffett, who became a billionaire through stock market investing
I’m a basketball addict. There’s one thing I observed.
Once LeBron James scores, most of the time he shows no emotion. He just runs back to play defense. But once he’s at the bench and sees his teammate scores, he jumps, he yells, he displays emotion in jubilation.
This simply means that watching the game is different from playing the game.
The same thing applies in the stock market.
Testing the waters
I have talked to quite a few about stock market and I always tell them that the first important thing is to experience how it is to be in this playing field.
You need to experience first the feeling of having your portfolio going up and down. I tell you, it’s a different feeling when your money is on the line. Powerful emotions start to creep in.
I was a newbie in 2009; and a newbie is always vulnerable to jitters. There is a tendency to be ecstatic when your portfolio is green and increasing, and nervous when it’s red and going downhill.
My experience taught me one thing: a person who enters the stock market the first time should not intend to make money instantly!
Hardcore businessmen know that it takes time (years) before profits are booked. Stock market rookies should have the same attitude. Experience is of essence first.
Otherwise, a new investor may end up buying more when the market is up and selling when it is down, which is the main reason why most new comers lose money.
As you go along you should learn to immune yourself of the ups and downs of the market. That’s the only way I know to deal with the irrationality of the stock market. So far, it serves me well (that’s by the way how Warren Buffett does it).
Learn
When I did my analysis on San Miguel Brewery (SMB, which is now delisted) in 2010, I found a gem. It was a check in all my boxes. I love SMB products, and it’s like a monopoly in the Philippines.
When I checked it in the market, it wasn’t moving. There was less trading. So I thought there must be something wrong, so I did not put my money on it.
Then one day its price just shot up and didn’t look back. I regretted that day I analyzed it and did not invest in it. I just missed quadrupling my money.
Further, I read one time a story of a New Yorker who got bankrupt because he invested in highly speculative stocks. He simply was in a hurry to make big money.
The market however is not, and should not, be treated as get-rich-quickly scheme. If you do that you may end up in a get-poor-quickly scheme.
If you want to be professional in this field, learn from your mistakes. Don’t forget to learn also from seasoned investors. That’s the second important thing,
Remember that when you’re an amateur, you are prone to commit mistakes. Nobody here does it perfectly the first time. Learn.
I tell you, those who do not know what they are doing are doomed to lose money.
Make money
Many consider the stock market as a big casino. I talked to someone one time and he told me that the stock market is rigged. It is manipulated by the big boys, and it’s only them who make money.
He simply missed making money the honest way, yes in the stock market.
What’s the point of putting money in the market if you aim not to make money? If you do not make money in three years then there’s something wrong with your strategy.
What’s the best and worriless way then to make money in the market? No one does it best than Warren Buffett.
Three things to consider if you’re just starting (I discussed these in my previous articles):
- Choose companies you are familiar with
- Invest in the most profitable ones
- Invest for the long-term
