December 31, 2021

5 Lessons as a Beginner Investor in 2021

I'm always quite conservative when it comes to investing. So conservative that in fact, my idea of investing is buying gold. Like, real, physical gold. 10 years later since I first bought gold bars as an investment, I realized that the returns are not as good as it seemed. Sure, it doesn't depreciate in value, but I wished it could be more, especially after factoring in the spread when you sell.

In the end, I decided to buy gold as jewellery. So that way, I can wear them and see where my money went.  I bought quite a lot of gold jewellery this year alone but now after a while, I got bored of buying gold. The pandemic has really caused a spike in inflation and passive investment is not yielding the result I wanted. That's when I realized that I should diversify and invest more actively to get better returns.

Now, I'm not giving you any financial advice, but here are some lessons I've learned so far.

1. Set a goal and plan your portfolio.

For me, my goal was to defeat inflation. So, that means around 8% annual returns is good enough. Now, another challenge is splitting the eggs in the baskets aka planning your portfolio. Obviously, you shouldn't put all your eggs in one basket, so you need to figure out which baskets are worth putting your eggs into. What I do is divide 50% of the money into long term holds and split the remaining 50% into short term/ trading.  You need to also plan how are you going to build your portfolio over time which means how frequent the entry is and how much.

2. Research your Options

I initially thought I could go into stocks, but I realized that I don't have the time to spend hours and days watching and studying the market. I later found that a lot of people have actually lost money investing in individual stocks, because you can't potentially compete with other investments companies that are buying them in bulk. So I needed something that I know going to increase in value over time such as index funds and crypto assets.

3. FOMO is Real

FOMO = Fear of Missing Out

When starting out with investments, it was quite stressful to see the price increase because I wanted to buy more at a discounted rate. Or when I see the price hike in 4 hours, I felt the FOMO.  It was stressful and it was real. I felt like I had to get in on this!

But then I realized that the market is volatile, will always come up and down. Switching to 1-day or 1-week graph or looking at the movement in one year makes me feel better. So, be patient. Even if it's increased 7% today, tomorrow it can dip to -5%. If I'm collecting that asset, I will set the limit order to a reasonable price below the current market price, because I know, it will dip and the app will auto-buy for me as soon as that happens. If it dips even lower than that, it's all good. It's fine. I can't expect to buy at lowest price all the time.

4. Knowing When to Sell is just as important.

When I first started getting myself familiarized with investing, I simply put $200 into NSDQ 100 index fund. Within 4 hours,  I gained $30. I put the money right before the uptrend and it was true beginner's luck. Unfortunately, I didn't know WHEN to sell, so I woke up the next day and found I had lost $100 and I was kicked out of position. =D

I knew I should've sold at $30 profit. but I didn't, because I was greedy and I thought I could get more.

The lesson here is, just as much as you need to plan your entry, you should also plan and strategize your exit. Luckily, my learning fee was just $100.

5. World is Full of Surprises.

As much as chart analysis goes, it's only ever good to tell what has happened, what is the current trend. It doesn't say anything about what could happen tomorrow. BTC was going upwards for a week, and in the last two days, dropped tremendously. So, accepting that surprise is part of it all, and having a less than perfect plan is okay as long as you can accept that risk. In other words, don't throw everything at the table at once. Spread out entry points periodically to get Dollar-cost Averaging over time.

I'm still learning a lot about investing. I had always avoided it because I thought I couldn't handle the downside. But as I researched, there are some options for me that I find acceptable. And I kinda like the thrill that comes with higher volatility of crypto. I wished I had the awareness earlier, but I didn't. At least I'm starting it now.

What about you? Are you into investing? If yes, do share some tips in the comments below, I'd love to hear it!

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