What Investing as a 19-year-old taught me for life | 15 lessons learned
I have been investing in stocks with great enthusiasm for several years. While jogging in the last few days I have been reflecting on how I invest. Here’s 15 lessons I came up with that I learned and follow until this day.
1. Think in probabilities, always
Everything in life is a bet. The question is: What is the probability I win this bet? Do all cruise companies really go bankrupt, even if the price suggests they do?
2. Being contrary
To be better than others, you have to do things differently. Often it is even a good choice to do the complete opposite of “the others”. I have seen this happen at the end of 2018, when Apple fell by 30+ percent; or in mid-2019, when Tesla was trading for around 200 dollars; or a few weeks ago, when cruise line stocks fell massively (85+ percent) — each time I invested even when the marked told me to sell.
3. Define goals
Where do I go and why? And above all how do I want to get there? I write this down to hold myself accountable.
4. Take risks
Without risk there is no reward. This also means: With some investments you look like an absolute idiot for a long time until you get proven right (or not).
5. Endurance
Endure severe price fluctuations. This also applies to comments from friends, family and especially so-called stock market experts. Nobody knows what the market will do tommorow or next week or next year. The only thing you can say with certainty about the stock market: It will go up or down or sideways.
6. Ignore the opinions of others
Once I am convinced of my thesis (e.g. Amazon will continue to grow in the future), I stick to it as long as I am convinced of it. I do not let myself be unsettled by other opinions.
7. Change your mind
I question my decisions. I am open for suggestions and like to discuss my investments. If at some point I no longer agree with a decision — this applies to all areas of life — I change my opinion and don’t feel bad (see point number 6).
8. Simple is helpful
If I cannot explain briefly and conclusively why I want to invest in company X, I will not invest. I need to have a good understanding of what is in my portfolio — I usually know that if I can describe it very simply.
9. Don’t focus on the uncontrollable
I try to concentrate only on the things I can control. I cannot give 12 billion dollars to a badly positioned company to help it survive. But I can look for a company that doesn’t need that $12 billion and grows.
10. Margin of Safety
Investment legends Warren Buffett and Charlie Munger swear by this margin for a reason. Mistakes happen. You’re not always right. It’s always better to plan for it.
11. Have a stopgap solution ready
For the case that the margin of safety is also killed, it makes sense to have a stopgap solution in place. A few weeks ago, even Buffett sold Investments (airlines) at a big loss.
12. Mistakes happen
And it doesn’t matter. I never invest all my assets in one value, so that I don’t lose everything with one bad decision. (That does not mean I diversify in 2380 companies. This can be a mistake too.) All big investors have made costly mistakes.
13. Compound interest applies to all areas of life
You get better over time if you stick to things. Things become easier and seem to happen faster over time.
14. Numbers do not lie, stories do
You can be told a lot of stories. Sometimes it makes sense to look at the numbers for yourself. Annual reports for example offer great insights.
15. Note everything
I write down my thought processes. Why do I buy this share? How will this company profit in the future? How will this company earn money? I simply write this down on the notes app on my iPhone. This way I can reread my thinking why I bought this stock in the first place — this is especially helpful during market downturns.