I find it ironic that I’ve decided to start this blog on April 1st. It wasn’t intentional, and this first post won’t be trying to fool anybody. Yet it is ironic in the sense that it’s a tale of how I was an investing fool for many years, but how in the past couple of years things have really started to come around. I hope that you can benefit from my mistakes and lessons.
I decided to start investing mostly in stocks back in December 2006 after owning mostly mutual funds and bonds since the mid-1990s. I could no longer resist my friend’s excitement about the surge in gold, silver, and particularly uranium stocks at that time, so I jumped in (but thankfully not entirely). After all, the newsletter “experts” he relied upon were telling him to. The returns in only a few months were fantastic; I rode the wave to the top, but then greed kicked in and I got face-planted into the beach of reality a few months later, yet far below where I started.
I dusted myself off and, like the gambler who can’t stand to live with wounded pride, looked for a new “machine”, a different approach to try to “win” that money back. Being a self-directed investor and not educated (nor frankly interested) about reading balance sheets and doing due diligence, I simply operated on hunches and, being Canadian, kept my money in the Canadian markets. I bought small-caps and penny stocks, hoping for “the big one” that would quickly erase the tens of thousands I had squandered away. Most of you can guess how that went. Now I was lower than low.
I could write a lot here regarding what I learned about greed and pride (subjects for later posts), but I didn’t put these lessons into practice because I also lacked a strategy, I lacked direction and discipline. Suffice it to say that I was beginning to believe folks like my father-in-law who sternly warned me that nobody “ever” wins in the stock market. Seeing how he was once badly burned and continued to make poor decisions (until he finally gave up a couple of years ago), I could see where he was coming from. I also began to view the market as a “one-armed bandit” and came to the conclusion that I didn’t have “what it takes” to ever make a return by investing in the stock market. Yet for some reason, I still kept hoping for something to turn the sorry ship around.
In early 2013, totally dejected, I began pulling my money out and sitting on the less than $10,000 cash that I was left with. I decided to give up on the markets, but now I was stuck with wondering how I could try to make a return on this money. Should I invest in property? Should I try to become part-owner of the successful businesses that some of my friends have? Should I just use it to pay down some of our mortgage and forget about ever investing again?
I don’t care if this sounds dumb, and I’m not trying to be preachy – I’m just expressing a part of who I am – but in exasperation I got on my knees and told God how I felt and asked for His wisdom in this situation. My employment situation had been rescued from the ashes in the same manner a couple of years before after reaching the end of my rope, so I half-heartedly hoped the same could be done with my investing situation – half-heartedly because I also had the wrong notion that God doesn’t want believers to invest in the stock market. However, I’ve learned since then that He doesn’t want anyone – believers or non – to put their full trust in it, and to be wise and prudent with how and where we invest. Anyhow, that was a side note – again, I’m not trying to be preachy, but just expressing who I am.
A few months later, in early July 2013, I was at a second-annual family gathering, and once again I decided to engage one of my uncles in some stock-talk. He has always been a successful small-business owner, but I had also known for years that he had won big on several stock picks throughout his lifetime, hence his large homes, new vehicles, and numerous vacations. He was living proof, in my mind, that a person could win more than they lose in the market, so I asked him what I should have asked him the summer before, with a tone of exasperation: “How do you find out what stocks to pick?”
His answer didn’t sit well with me: he subscribes to investment newsletters. My mind flashed back to my gold-crazy friend who spent hundreds of dollars per year on “experts” who were telling him to invest in this-and-that fad stock or industry. However, they never told him when to get out. It was a big money-grab, I thought, and so I wasn’t interested in that ever again.
However, I remember my uncle also lamenting how he wished he had gotten into Tesla at $40 when one newsletter had recommended it at that price, and how he wished he had gotten in to this-and-that stock when it was recommended. But like the shrewd man he is, he didn’t get into much detail about what his biggest successes were nor what newsletters he subscribed to. I was left hanging.
Ironically, just prior to that, I had decided that I needed to devise an actual investing strategy, and here’s what I came up with and typed out: “Buy companies that have an actual track record, preferably a long-term one. That are diversified. That are HUGE. That pay a dividend? Oh, and don’t lose any more money.” The problem? I didn’t know yet how to find such companies!
Not long after talking with my uncle, I began to start reading the news articles that appeared on my iPhone’s Stocks app. I hadn’t noticed them before because until I bought bigger stocks like Encana (a Canadian pipeline giant, based upon my own research), the junky small-caps and penny stocks I was following didn’t have such articles.
It was then that I first discovered articles by the likes of Seeking Alpha and The Motley Fool. Not long after, I ended up subscribing to one of the services offered by The Motley Fool, and I began my voracious reading of their articles and recommended stock picks. Then I began to buy my first round of stocks that have in some cases dramatically turned my situation around in the past couple of years.
(NOTE: I don’t like to promote any particular company’s investing service over another since different ones suit different investing personalities. I also have another company’s service that I subscribe to in order to balance my perspective. Contact me if you’d really like to know my favorite subscription services and ones that I know have been of great benefit to people like my uncle.)
So did my investment in an iPhone turn the tide? Was it my new strategy? Was it the chat with my uncle? Was it the discovery of insightful investing services? Was it the time on my knees? I believe that the latter was the catalyst for everything that’s happened before and since, and again call me dumb if you wish.
But I will state emphatically that without the insight and advice offered by the services I’ve subscribed to, my strategy would have remained like a racecar without wheels. Specifically, now that I understand that volatility is a fact of life in the stock market, I’m able to hold on and not panic. I’m learning not to flinch. I’m learning to see the big picture. I still don’t care too much about balance sheets, but I’m learning boat-loads more about industries and trends and buying stocks in the companies that are leading them.
Most importantly, it’s finally clicked with me about why buy-and-hold is the biggest secret to investing success, not trying to time the market or fluke out and choose the next miracle penny-stock, thanks to insights about gurus like Warren Buffet. And specifically, buying and holding great companies, not just any company like some small-cap with big ideas yet zero track record.
Ironically, I’m also now a part-owner of several wildly-successful businesses, just not ones that are owned by any of my friends! Businesses like Disney, Under Armor, MasterCard, Starbucks, etc. So my wishes and prayers got answered in ways that I didn’t exactly expect, but they still got answered!
For those of you who’ve hung in there and read this entire investment testimony, I hope that it’s been an encouragement and an inspiration. You can “win” by investing in stocks, but it starts with having a proper mindset (or changing your current one), learning the nature of the market, and knowing where to look for the right information.