In 2014 at the age of 23 I decided to buy my first stock. I hadn’t done much research and the only related book I’d read was Rich Dad Poor Dad. If you’ve read this book, it is not a ‘how to’ book, never mind a ‘how to buy stocks and shares’ book. Instead, it outlines why it’s better to buy assets that liabilities. Assets (rental property, a business, stocks and shares, etc) put money into your pocket. Liabilities take money from your pocket. In light of the teachings from this book, I thought, that’s it, I’m going to start investing. I was excited and believed I was now on my way to breaking free from the 9–5.
I opened an account with a broker and did some quick research. I discovered a company called Afren (an African Oil and Gas exploration and production company). The only reason I bought them I because I’d seen their price fall about 50% off their highs. I thought, they’ll get back to where they were and I’ll make some dollar. I was buying shares in a company purely based on the chart. I didn’t look at a single annual report. Not one. Complete amateur.
Within a month of buying the stock, the share price went to zero. The company had went into administration. Fortunately I’d only invested £250. For me at the time, this wasn’t chicken feed. Looking back, £250 is a small price to pay for a valuable lesson.
Since then I’ve read countless investment books and have thus far never made the same mistake. The majority of my investments are in low cost tracking funds. This way I’m diversified and my fees are as small as they can be. I accept that I’ll never make the same gains as someone who successfully picks winning stocks. I’m also aware that someone that can outperform the market is extremely rare.
This error of judgement was caused by my lack of patience and my willingness to take actions and get things done. It’s my biggest strength, but it’s my biggest weakness. I’ll talk more on other posts about how my action orientated personality has hurt me. On this occasion, I just wanted to get started in investing. In hindsight, I should’ve done significant reading on the subject before diving in. Almost all investment books recommend low cost index funds and the remaining books recommend thoroughly checking out the companies accounts. I did neither. Painful lesson. If you’re thinking about buying shares in a company, don’t do what I did and dive in without a bit of research. I recommend Money Master the Game by Tony Robbins as a place to start. Once you’ve done that, watch some videos on YouTube of Warren Buffet. He’s the wisest of them all.