Thread: Figure this one is a given - Stockmarket

Been trading about 3 years. Here is what I learned. Some stuff might be off, if you feel like correcting please do so.

Don't start with anything under at least $2000, you will get killed on broker fees (even at $7 a pop = $14 per trade you have to make just to break even)

Nobody knows what will happen. Once again, not a single person knows what will happen. Be very careful listening to people.

I lost a lot of money listening to insider's sure thing. Another friend has an inside guy at exec level promised huge contracts and his stock going up - guess what down 60% right now.

Stop loss. Stop loss. Stop loss. This one has been huge and painful for me, because, well I am stubborn and optimistic. The thinking is always "well, this stock might come down a bit, and stop loss will trigger but then it will rally and I'll miss out"

Yep, not having stop losses lost me about 40% and 60% of my portfolio. I will not make this mistake again.

Losing 20% of your portfolio means you have to make 25% just to get where you started. Losing 50% means you have to make 100%.

Picking a stock - listen to people and then monitor a stock and get to know it before you jump in. A few weeks/months should give you an idea of how the stock performs, so you can jump at the right time.


Hardest part of owning stocks is selling them. You must have an idea at what point you are comfortable selling, and at which point you should sell. Nobody goes broke taking profits, people go broke all the time chasing greed.


A lot more can be said I'll let you guys chime in.
Cheers

Great points!

One thing I'd adjust is picking stocks. Should you decide to pick stocks (and not an index), monitoring its fluctuations (a la technical analysis) isn't enough. I'd say do your due dilligence in analyzing the company's financials. How much debt has the company taking on? Is it too highly leveraged? Are revenues and profits growing? What type of assets are they holding? What are their values? What is their ROA, ROE and all of those other wonderful ratios?

Other than strictly their financials, what industry are they in? Is the industry growing? Is the company an industry leader? How is the company managed? What is the culture like? Is the business model sustainable for the long term? Or is it based on trends?

A lot of questions, I know. But if you want to pick single stocks, and be comfortable with their returns in the long-term, you really should get an intimate knowledge of what their business is all about.

Originally Posted by Exact

Ah... let me tell you about failure in the stock market :-) In 2006 I made $150k after taxes flipping real estate. In 2007-2008, I started shorting real estate and made an additional $100k on REIT put options (again after taxes.) This was in addition to the salary I was drawing from my internet business. At this point, I thought I could do no wrong. I thought we were headed into a period of rampant inflation so I put all $250k into oil and natural gas stocks towards the end of 2008. BIG MISTAKE. Since then my portfolio has fallen by 80% -- from $250k all the way down to $49k and still falling. This experience has taught me a lot of humility. I wasn't really a smart investor like I thought of myself -- rather I just got lucky a few times and thought that I knew everything. I also failed to diversify my investments, which is fine if you are a Warren Buffet type, but a huge mistake if you are just a part-time investor like myself. In the future, I will only dollar cost average into index funds, a little bit each month. I will also hold more in real estate because I have a much better understanding of real estate. I always thought I would retire from my investments, but realize now that my internet business (which is something I have even more control over than stocks, indexes, or real estate) is my best chance at an early retirement.

Brother, can I relate to the last part. I used to have this amusing trait that made me think I can continue never losing at stuff.

I made some money gambling and though - "Wow this is easy I can keep doing this to pay rent. WRONG"

Then it was stocks - "Who needs a job when you can make $ here?! WRONG"

It is a great lesson to learn, that life has ups and downs, and you just gotta keep going.

Originally Posted by Rawr

Brother, can I relate to the last part. I used to have this amusing trait that made me think I can continue never losing at stuff.

I made some money gambling and though - "Wow this is easy I can keep doing this to pay rent. WRONG"

Then it was stocks - "Who needs a job when you can make $ here?! WRONG"

It is a great lesson to learn, that life has ups and downs, and you just gotta keep going.

But also that you can never be too careful when making an investment decision...or any decision when your own money is at stake.

Originally Posted by Rawr

Losing 20% of your portfolio means you have to make 25% just to get where you started. Losing 50% means you have to make 100%.

I like this. Makes it sound kinda like the house edge hehe

- Hakrjak

Originally Posted by Exact

Ah... let me tell you about failure in the stock market :-) In 2006 I made $150k after taxes flipping real estate. In 2007-2008, I started shorting real estate and made an additional $100k on REIT put options (again after taxes.) This was in addition to the salary I was drawing from my internet business. At this point, I thought I could do no wrong. I thought we were headed into a period of rampant inflation so I put all $250k into oil and natural gas stocks towards the end of 2008. BIG MISTAKE. Since then my portfolio has fallen by 80% -- from $250k all the way down to $49k and still falling. This experience has taught me a lot of humility. I wasn't really a smart investor like I thought of myself -- rather I just got lucky a few times and thought that I knew everything. I also failed to diversify my investments, which is fine if you are a Warren Buffet type, but a huge mistake if you are just a part-time investor like myself. In the future, I will only dollar cost average into index funds, a little bit each month. I will also hold more in real estate because I have a much better understanding of real estate. I always thought I would retire from my investments, but realize now that my internet business (which is something I have even more control over than stocks, indexes, or real estate) is my best chance at an early retirement.

Good story. I find this so often -- So many people I know have "gotten lucky" in stocks or Real Estate, and now they think they are the golden boys/girls and want to call themselves investors now, and furthermore want to give advice to me. I look at them dumbfounded and say, "You just admitted that you only made money out of pure luck on that deal, so what makes you think I should follow your advice here?"

- Hakrjak