I was checking my blog again and I realized my last post was about a year ago. I left you with my assessment on American Express 2020 Stock Price back when the covid crisis hit the stock market and most of the stocks were on sale! Since then, so much happened: both great and bad investments, unexpected pay out from old ones and even a few total failures. Bottom line, if you were wondering whether I had given up on investment… well, hell no! I simply went under the radar. Why? I have no idea. I would have to think a bit longer to articulate that but back then it felt like the right thing to do.
So here I am, back at my desk, sharing what I learned on my way to financial freedom after a year investing, trading and rediscovering crypto currencies!
Disclaimer – this article is by no means a recommendation. I am sharing my views on investments I made in the past year. References to price levels or past buy/sell orders are not financial advice and do not take into consideration any current market conditions.
Quick Reminder: Why Investing?
We have all heard the story: time = money.
We have all heard it and we have all somehow fallen for it by directly exchanging out time for money. This is not necessarily a bad thing… if you are genuinely content about the way your time is being used. The problem with this model is that your time is limited, and for as much as you can increase your hourly rate, your growth potential is relatively limited.
And don’t get me wrong, when you are starting out, you will inevitably start exchanging your time for money. But to grow, you need to think differently about how you spend your time. And more precisely, you want to spend your time creating assets that in turn will “work” for you.
So, once again, spend your time creating assets. And your assets will take care of the rest.
This is exactly why I invest.
PS: what will I do with all the extra time I free up, you ask? One thing at a time, I can only share so much in one article 😛
My Entry in The Stock Market: Investing During Covid
Gonna be honest with you: for long I had been just f-ing around with investing. Bought a little bit of that company, dumped some more in some other company, and never looked back at it anymore. That’s how I found myself buying Tesla (TSLA) when it was just $50, Ali Baba (BABA) and some other mainstream companies I liked.
Before what I call the Covid Sale, I wasn’t focused, and I didn’t have much of an investment strategy. I was early in the game, reading a bunch of different books on investments and trying stuff out on exchanges, online brokers, etc.
Despite my chaotic start in the investment world, I didn’t do that bad. I was lucky enough not to lose my money.
TBH, I did lose some on commissions and stuff like that – I wasn’t too handy with online broker accounts, didn’t understand much of the terminology and ended up losing some unnecessary money over a few trades.
A few months before Covid hit in March 2020 (in Europe), I had closed most of my random-ass online broker accounts and opened a decent one where I was going to start investing consistently. I chose a DEGIRO Custody Account – since I’m based in the Netherlands, this is the go-to platform if you wanna invest long-term. I can tell you more about how I came to this conclusion, or what other platforms are out there – especially if you’re into short-term trading strategies like scalping, swing, momentum, etc. You can do stuff like this in DEGIRO too, but you are not as flexible since it doesn’t allow partial ownership (in other words – you cannot buy 0,2425345 shares of Amazon, AMZN).
So, where were we. Covid hit, yeah. March 2020.
I had decided to start investing regularly in January 2020. Mostly dollar-averaging on S&P500 and starting to venture out in company valuations. Suddenly, March 2020 brought a BIG sale on the stock market. It was like shopping at Zara in the big sale after Christmas. Mayhem! Not for me tho. This was such as exciting moment when I saw most of the companies I was targeting and analyzing drop 10%, 15%, 20% and more. I managed to purchase S&5P500 (SPDR500) at $300, Uber at $18, Amex at $71!
How to Compound In Your Investment and Trading Strategies
Compounding is the mechanism of reinvesting capital gains for exponential (long-term) portfolio growth. In other words, you start investing €100, you gain €10, you reinvest €110 and so on and so forth.
The key in this story is: REINVEST.
What I had shared in this old article from May 2020 (Understanding Compound Interest) is not entirely true, I missed the essence of compounding and only covered the aspect of averaging to buy at different price levels so that on average you remain under market price on the long-term (assuming steady growth).
This realization came in hard. I realized that if I kept my positions long, I was NOT compounding. To do that, I had to reevaluate my portfolio and think of a system to cash out and reinvest my gains.
It is a lot more difficult than I thought, to be honest. My strategy was, and still is, the following: I pick an expected reward (guess work, here) like 10%, 15%, 20%, 30% – depending on the deal – evaluate my risk at the support (lowest level on the monthly chart). When the investment hits my target reward, I am out. For better and for worse. You’d think.
When that point comes, I’m telling you, sticking to your strategy is one of the most difficult emotional effort to do.
Your monkey mind (which I call Wario – like the evil version of Super Mario) starts making a lot of noise and a few times it took over, I didn’t sell, and messed up my whole investment because of that. I’ll talk about it in a second.
Trading Strategies: Highs and Lows
Similar trading strategy around company news you can pick up before they go mainstream. This one is before the Tesla event, and it went sour!
You might have heard of Wirecard AG, a German bank involved in a huge accounting scandal. Well, I bought some shares after the massive drop confident that it was a clear overreaction of the investor community, and that the German government would step in and fixed the mess.
I wasn’t familiar with trading strategies, risk/reward targets, etc., so I had blind faith in my assessment and went on investing in the company, expecting it to raise to pre-scandal valuation.
To my disappointment, I saw that stock triple in value (still didn’t sell – remember, I had no strategy) only to crash FAR below my entry point. The scandal turned out to be a lot more serious than I thought and the company got eventually delisted from the stock exchange.
I lost a solid 60% of my investment here. Learn my lessons. And moved on.
(This ended up well)
Beginning of Nov. 2020, I was browsing some of my usual sources of information – not talking about newspapers, but less user-friendly stuff like the Securities Exchange Commission filings etc. – and I see that they had formalized the decision of adding Tesla to the S&P500! This event was going to be announced on December 11th and finalized on December 21st. Sounds like a no brainer, right?
Learning my lessons from the Wirecard story, I layed out my trading strategy before stepping in. Support level was at -5% (meaning, I could have lost 5% if the stock value had dropped below the monthly chart), and I had set my target reward at 20%. I bought.
December 11 news gets out that Tesla was going to be listed. Market gets hyped. December 16th Tesla rises to 26% and that’s when I sold again – actually realizing the 26% profits.
TBH, I could have sold a few days before that, when it hit 20-22%. But I needed time to calm screaming Wario down and stick to my investment strategy. For better and for worse.
In this case it went GREAT for me. Yes, Tesla rose more than just 26%. But it doesn’t matter. For all I knew, I could have lost that as well. It is FAR more important to realize your profits and reinvest.
My (Re)Entry in the Spacey World of Crypto Currencies
In all this madness, I had completely forgot about crypto and some old investments I had made back in 2017.
Again, in those years I was messing around with crypto currencies, simply buying what I thought it was cool. Leaving it in some vague-ass wallet. End of the story. I wasn’t much into the technology behind it and what it means for our future.
I was slapped back on my feet when I saw my DOGE skyrocket to $ 2400 out of the blue! From only $ 100 I had put in back in 2017. And it didn’t stop there.
And this is how I got back to crypto – for real this time.
This deserves a whole article, I’m afraid. So, hang on tight, and I’ll see you there!
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Disclosure
These are unqualified opinions, and this newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor, and do your own research.
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