My Personal Investing Experience and The Huge Mistake I Made (Learn From It!)

Wouldn’t you be fascinated if someone provided you with Get Rich Quick Scheme?

For me, that someone wasn’t from my family or my friends, but rather from a movie. Back in Grade 11, I watched The Wolf of Wall Street for the first time (I have watched it four times in total). 

I was astonished to see such a brilliant display by Leonardo Dicaprio. But even more astonishing was that the movie showed him getting rich within a very short time span. 

Right after the movie, I went into a deep thinking….

Is it really possible for someone to earn so much money in no time at all? If it was possible, then why didn’t I learn about money in my school?

Topics:

  • My First Investment
  • When I Met Diversification
  • Learnings From Successful Investors
  • Current Update

My First Investment

You should have seen my face right when I bought my first stock! It was arguably one of the happiest moments in my life so far.

After thinking a lot after watching The Wolf of Wall Street, I decided to buy my first stock at 16! 

But to my horror, my parents didn’t allow me to do so. They told me that I was too young to learn about this stuff. And anyway, they said I should rather focus on my academics.

To say the least, I was disappointed. I had to wait for more than a year to actually buy my first stock. 

I finally bought my first stock at 18! 

On the positive side of buying it late, I was able to research a lot about the stock market.

I had made a foolproof strategy, or so I thought. A few months after buying my first stock, I checked to see what was going in the stock market.

Little I know I had lost more than 20% already! 

“What should I do now? Should I sell it to minimize my losses, or hold it in the hopes that its price might increase?” 

As I couldn’t bear losing money in my first stock, I decided to hold it. 

A few days passed before I peeked into the stock market again. I was hoping that the price would increase a bit, so I could sell it and buy new stocks.

To my dismay, it went the other direction. Down by more than 30%!

Without thinking, I sold it and never looked back at that company.

While I had done a lot of research about that company beforehand, I hadn’t realized how it had been facing intense competition from the other firms. Moreover, only later I found a lot of its customers were unhappy with its services. Thus, this affected its profits badly. The reduction of profit meant a reduction in its stock price too.

Lesson Learnt: Never buy a stock just because it performed well in the past. The past is the past, what really matters is how it’s performing currently and how will it do in the future. In my case, while the company’s past was great, the present wasn’t good and god knows about its future!

“I made my first investment at age eleven. I was wasting my life up until then.”

Warren Buffet

When I Met Diversification

Diversification is the strategy that involves mixing a wide variety of stocks in your portfolio. Its main purpose is to reduce your overall risk exposure.

At first, I thought diversification was a weird concept. Even my role model, Warren Buffet said, “Diversification is protection against ignorance. It makes little sense if you know what you are doing.” 

It was only after a long time that I realized I had misunderstood the concept of diversification. 

Being a teenager, I could not afford to risk holding a few stocks only. I realized that even if one of my stocks made huge losses (just like my first stock), I would be vulnerable.

Hence, after doing extensive research, I started buying some stocks from other industries as well.

Since then, I’ve able to weather any storm that has come in my portfolio.

“You must be diversified enough to survive bad times or bad luck so that skill and the good process can have the chance to pay off over the long term.”

Joel Greenblatt, Investor

 

Learnings From Successful Investors

While learning about investments, the first great investor I came across was Warren Buffet. After all, he’s the fourth richest person in the world.

Besides him, there are a few other prominent investors that I learned about over time. One of them was Rakesh Jhunjunwala. 

Jhunjunwala is a Billionaire Investor from India. I loved how shrewd and strategical he was while buying stocks. But more than that, I loved his simplicity.

Whenever I pictured rich people, I used to think about how they portray their materialistic goods as a way to show their superiority.

But I found Jhunjunwala to be so different. He’s as polite as a person can get. His simple approach to life taught me that we can be rich and at the same time, respect others as well.

Another investor I admire a lot is Benjamin Graham. Though he is not with us today, his principles will always remain in this world.

Before learning about Graham, I used to think stocks as merely “stocks”, and nothing else. But Graham shifted my paradigm. He educated me that a stock is, in fact, the part ownership of that company. With the ownership, we have some rights and powers over the company’s workings. 

Since then, I stopped thinking stocks as just “stock” but as something that makes me a potential decision-maker in that company. 

P.S. I just finished reading Graham’s bestseller The Intelligent Investor for the third time. You might also want to have a peek at it, as even Warren Buffet calls it the greatest book on investing ever written.

“Spend each day trying to be a little wiser than you were when you woke up.”

Charlie Munger, Vice-chairman of Berkshire Hathaway

Current Update

Currently, I’m finding it hard to do anything amid this coronavirus pandemic. The stock market has closed down in my country for more than two months now, and there’s no plan to open it any time soon. 

Anyway, this has given me the time to rethink about my investing strategy. I am able to reflect upon myself and review my investments accordingly. 

I hope to invest some more before my graduation as a part of my ‘Long-Term Investment Plan’. 

Last Word of Caution: You have to realize that earning a great deal of money while investing won’t come quickly. Don’t fall into the trap of ‘Get Rich Quick Scheme’. 

20 thoughts on “My Personal Investing Experience and The Huge Mistake I Made (Learn From It!)

  1. Diversification is the most profitable one. From my experience, I have been able to get profit. Really loved the post.

    Like

  2. Warren Buffet has been my inspiration. I think diversification won’t be profitable. When we tend to focus on particular thing, we get to learn more. Anyway, you have started from an early age. Hopefully, you will achieve investment goals.

    Like

  3. Stock market has been closed ? Damn that sucks big time. Stock market being open is one of the few things to do for a lot of people here haha
    Recommend reading “The Most Important Thing” by Howard Marks if you haven’t already !

    Like

    1. Hi Kalani!
      Yes, it has been closed since this lockdown. This is so frustrating, though I should handle this.
      Oh, this book seems worthy of reading. I should go through this. Thank you for the recommendation. 🙂

      Like

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