If you only got here hoping to read about some get-rich-quick trading methods, I am sorry to disappoint you. (Actually, to be honest, maybe I ain’t that apologetic.)
No free lunch in this world, guys…
It’s my belief that trading’s main purpose and outcome is to fatten the wallets of brokers and financial institutions. On average, you probably have to be “way above average” to emerge a winner in that game and my suggestion to anyone just starting out?
Avoid it like the plague.
Don’t lose your hard-earned money!
But seriously, who am I to be dispensing any information on trading when in fact, I have never done any real trading before!
Ok, probably no day trades. How about a one-week trade? One month? Or even a year? Nope. Nope. Nope.
And in case you’re wondering if this is a self-congratulatory blog post, let me assure you that you’re way off the mark. I am literally quite ashamed to be mentioning that my holding period for one of these 9 completed trades was as short as 13 freaking months.
To give you a better idea of what I am talking about, here’s a table with some details of the first 9 completed trades of my life:
And below are my “somewhat critical” reflections:
Used Up Half Of My 20 Ticket Punch Card
“I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches – representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all. Under those rules, you’d really think carefully about what you did, and you’d be forced to load up on what you’d really thought about. So you’d do so much better.” – Warren Buffett
With an average holding period of 33 months, I could have given myself a pat on the back for being less trigger-happy than the average investor. However, I prefer to set myself against higher standards.
Interestingly, although I have only completed 9 trades so far in my investing journey during the past 5 years, I have already used up half of those 20 slots. And if you look at the stocks that I still hold in my portfolio, I have literally used up the whole card. Urrgh…
Can I have one more card, please?
Lacking Conviction & Being Lazy Sometimes
I think I am already being very kind to myself by using “sometimes”. If you take a closer look at the first two trades on the table, I would say I didn’t know what I was doing. Or maybe, I just panicked when the prices became more volatile than what I could stomach.
Although it might not be known to you, I do read up quite a bit on a company before I invest. However, I rarely keep up with the changes to the company. I skim through quarterly reports (that is if I even open them up at all) and prefer to use my time to read other materials rather than detect potential issues lurking in the annual reports.
Thus, I feel that it’s fair for me to be “punished” for my lack of conviction in my first ever completed trade. Even with the recent saga, Silverlake would easily have been a 2-bagger for me.
Psychological Bias Against Selling Losers
“Playing stocks is easy. Sell your winners after they have doubled. And hold on to your losers until they recover. You will never make a loss this way.” – Deluded Investor
I always chide the Mrs when she tells me that it’s ok if a stock is trading at a price below our buy price. After all, it will eventually recover. To me, that’s a dangerous thought to be having.
And boy was I shocked that subconsciously, I have been practicing that. I only compiled the above table yesterday, out of curiosity. I couldn’t believe that I didn’t make a loss at all on my completed trades thus far!
Granted, most of the losers in the portfolio are oil-related stocks and having missed the chance to sell them away at a high half a year ago, I might have to hold them for some time. Nonetheless, I have to make sure I am not dogged by “the fear of selling at a loss”.
I Have Been Lucky Thus Far And It Might Not Continue
Most of the time, I have been saved by purchasing a stock at a low price. This accounted for some decent XIRR returns. Perhaps I was just being rewarded for practicing some margin of safety and doing a little more due diligence than usual. Especially so during the start of my investing journey.
But after a while, I took some shortcuts and Charlie Munger was right to say that in the long run, one tends to get what one deserves.
If only picking stocks was that easy….
As I have realised over time, many of the companies I have bought into are subject heavily to their own industry cycles and are probably not “buy, hold and forget” companies. And considering that I have little interest and passion to be constantly updated of a company or an industry’s latest happenings, I might not be doing my investing correctly.
Something has to change as I can’t continue to rely mostly on luck.