Rookie investor episode 1

I'd compare my experience with investing a little bit like Benny Hill movies.The end of the movie is always the same: everyone ends up chasing Benny Hill.

So I, like probably most beginners, was chasing after:

• a lot of articles,
• following exchange rates,
• checking few times per day the value of the US dollar is worth versus the Japanese Yen or the British Pound.

I even started looking at the performance of many investment funds. I was always chasing after what the mass media were saying about stocks and to the forecasts that people should follow. If you are doing that then a friendly piece of advice is..stop doing that and focus on your family and find another hobby.

Then one day I managed to opened my first brokerage account. This was my first contact with leverage. It was wonderful playing with five times more money than I had on the brokerage account. The only problem was I had to top up my account 3 days after buying a specific stock. If I didn't have enough cash on my brokerage account I simply closed my position to get the money back that my broker was asking for and although I thought I will become a rich by trading at 5x the capital that I initialy had as you can probably guess that very often my positions were at a single digit loss whith multiplied by 5x gave a huge double digit loss. This is how I understood that more than 70% of traders actually lose on day trading. These were the days when banks were not informing so openly about that. You just had to figuere it out youself.

If you have the same mindset as I did in the past then I suggest you stop treating the stockmarket as a casino. I understand that it gives you the same amount of adrenaline as at the casino but on the other hand you are going to loose far more money x5 than at the casino. At the casino at least you can meet some new people and they have sometimes shows and free drinks.

I also tried chasing the news and whenever I saw some hot piece of news about a very popular stock I tried hopping on the boat but I always managed to get at the top and I had to sell at the bottom. I guess I quickly learned that if the news is on the Internet it's probably too late to join the party. I've also tried buying stocks before earnings and this sometimes worked and sometimes it didn't. If you somehow behave in a similar way as I did I srongly believe you follow far too much social media and you read far to many useless articles. Why not read a book about the stock market cycles or generally investing? Rather than listening to nonsens from the mass media just learn to make your own conclusions.

After a couple months of trial and error I wanted to try out something different and to Outsource managing my wealth by buying units of investment funds. I thought that there must be a bunch of smart people managing a huge amount of capital there so why not give it a try. I learned from every known banking institution that there are basically three types of investment funds such as:

1. safe: that only invests in bonds.

2. Moderate: that invests between 40% up to even 60% of the whole portfolio in bonds and 40% up to even 60% in stocks depending on the market situation.

3. Aggressive that invests almost 80% of the portfolio in stocks and the rest in bonds.

Now which two types of investment funds do you think I invested my hard earned money  into? Let me give You a tip:I was interested in higher returns and I wanted to beat the main stock market index. The investment funds I chose were pretty successful but what I didn't consider was:

1. the cost of managing this portfolio.

2. The fact that out of hundreds of investment funds only a handful ever manages to beat the main index on the stock market.

3. ETF fees are a fraction of that what well managed funds charge.

The investment fund took basically 2.5% in maaging fees on the moderate and even 3.5% or even 4.5% on the aggressive portfolio (depending on the performance)! When I did the math quickly I understood that I better learn how to manage my money muself or else I'll end up paying a little fortune on those little fees that will grow over time (2.5% from $100000 is $2500 and if you multiply it by 10 years that is $25k and after 30 years it gets even worse, $75k!).

I realised that I have to learn how:

A. to manage my own portfolio, 

B. how money compounds over time, 

C. to manage risk, 

D. to save and earn more money so that I will be able to add more funds on a regular weekly basis in order to buy more stocks to my portfolio. 

The most important lesson here is that you need to "mind your own business, if not... nobody will mind your business for you". Now I've had all this terrible experience, do me a favour and don't copy my bad investing habits or if you already have them make a 180 degrees turnaround.

Now I'm thinking why I have made all those mistakes and I guess it's because unfortunately neither my parents nor all the schools that I graduated have ever taught me about money and investing.