Tuesday, June 14, 2016

3 Lessons Learnt from My First Year in Stocks

Hi Everyone,

It's been one and a half year since I started this blog and at the same time, my investment journey in stocks/shares. It's been a rough ride for me as there are some ups and down during this journey and I have learn some valuable lesson during this one and a half year and would like to share with the readers.

1. Do Not Rush into Purchasing High Dividend Shares

I remember when first I started off with stocks/shares, I was inspired by various financial blogger who show their portfolio and their monthly/yearly dividends in their blog. So I did a scan through for high dividend yield shares and discover that most of the high dividends yield types of shares are REITS, ranging from 4% to 8% (at that point when I started investing). 

Of course, if I were to choose (during that time), I definitely would choose the highest dividends yield so that I can get more dividends in the future (It is an obvious and common sense kind of choice). Before my trading account is ready, I already got some of them in mind (I forgot which are the shares that I shortlisted) and I told myself when the time comes, I will go ahead and pour all my money into these shares and collect dividends until shiok shiok (Shiok = Great! Satisfactory kind of feeling). 

However, before I made those purchases, I stopped. The reason is because I do a self reflection on my action before I click on the "Buy" button and realize that I do not know much about the company that I am investing at all! This makes it a risky move as I might lose all my money if those companies that I shortlisted goes bankrupt. 

So I took a step back and re-analyze the companies and finally after understanding their business nature and some analysis given by the financial bloggers, I took the first step and purchase my very first shares, Keppel DC REITS. I have shared before on why I purchase Keppel DC REITs is because of it's business nature (Data Centers). As IT become more prominent in this era, there is no doubt that REITs for Data centers will be a hot choice for a IT graduates like me. I purchase a small position in Keppel DC REITs and I hold it till today and I won't be selling it off as of now. (Unless I need money). 

So, don't be hard up over dividends! Read and understand the company well before purchasing any stocks/shares instead of just relying on high dividend yield.

2. Start Small, Don't Rush

During my initial days of investment, I rush into the stock market after reading some of the company profile and understand their business nature. I put in nearly three quarter of my savings into shares and hope that I can gain most out of it. This is truly a mistake for newbie investors because market can change anytime, from bull to bear. It is really scary to see your share price falling and losing few hundred dollars in just less than a day! 

(I have encountered such experience with DBS when I purchase it at around $19.70 for 300 shares and in few hours, it drop to $19.32. But luckily, I hold on to it and manage to reap profit instead of loss)

So start small, do not rush in because it will be hard for you to digest when you see your share price falling like nobody business. This triggers you to whether to sell to cut loss or hold on to the shares and wait for the share price to increase. In my personal experience, I will tend to have the mindset of selling off because of the sudden panic that your money is slowly fading away.

Start small and once you are comfortable with the shares then slowly invest more (incrementally) to build up your portfolio and earn good dividends

3. Do Not Buy High Sell Low

Many people will think that this point is useless because it is obvious that no one will do that as it will mean that you will lose money. However, I can tell you that despite the fact that it is common sense, many people will still do it. Some say that they are doing this to cut loss, or due to panic sell or just following the crowd. 

I must admit that I have done that before and I truly regret it because now that shares that I sold with a loss, it is now way above my purchasing price. If I did not sell that share, I will be happily collecting dividends and sitting on paper gain. But what done is done, it is a important lesson that I have learnt for this episode that I must be calm when investing in shares that I believe in.

Some Bonus Stories from Warren Buffett - The first share that he ever bought and the lesson learnt

At the ripe old age of 11, Warren Buffett went into the stock trading business with his sister, Doris, buying six shares of Cities Service, an oil service company, at $38 a share. Buffett had identified Cities as an undervalued stock and was confident of making a nice profit for himself and his sister. Unfortunately, the stock lost almost a third of its value within just a few weeks of Buffet purchasing it. Despite his sister haranguing him continually about their dwindling fortune, Warren held onto the stock until it rebounded to $40 a share, when he closed the trade for a $2 per share profit. He then had the unpleasant experience of watching the stock rise to over $200 a share without him.

Buffett's experience is a good example of the importance of timing in investments. Another legendary stock trader, Jesse Livermore, stressed the point that it is nearly as important for an investor to be right in his timing as it is for him to be correct in his directional forecast. A stock may indeed be going to advance from $50 to $100 a share, but time and again investors have lost money buying it while it was first dipping down to $20 a share, only to then, like Buffett, watch it finally take off without them. Successful investing requires that traders be correct in their overall forecast for a stock and that they enter the market at the right time to realize a profit. Smart investors wait for market action to confirm their investment hypothesis before entering a position.

Patience is indeed a virtue for investors. Buffett exercised patience well in waiting for the market to come back in his favor, but he failed to be patient enough to take full advantage of the stock's profit potential. Having successfully weathered the storm, he failed to observe the adage, "Let profits run." Still, he did make a profit on his very first stock trade.

Source: http://www.investopedia.com/ask/answers/021915/what-was-first-stock-warren-buffett-ever-bought.asp

So with this, what are some of the lesson that you have learnt? Care to share some with me? If you have written your experience, do share the link with me so that I can read more about your experience.


  1. Quote : "So, don't be hard up over dividends!"

    For this, you have learned. Many folks out there still not learning but just following. :-)

    1. Yea, this is indeed an important point. Because initially I was confuse by this term "Dont be hard up over dividends", which I thought the person might be trolling as dividends is part of the reason why we invest in shares, which is to generate income.

      But after a few months,I realize the meaning of this phase which I think this is really an important lesson that all newbies must really understand

  2. Stock Investment when you manage it well especially from start, is a learning and rewarding experience.

    1. Hi Cory,

      Yea if manage it well from the start might have some positive gain. but for me is my mistake of greed which makes some irrational decision that cause me a small fee to learn some valuable lesson. haha hope I wont do the same thing again.

  3. Hi jykl
    Your beginning is already much better than mine. My first 1.5 years is crab... Lol

    I dun even understand what is equity but bought shares and win money. Lol

    Then all go back to the drain plus all my savings I accumulate from NS in university

    Better to
    Make mistakes when young

    1. Hi Sillyinvestor,

      Yea it's always better to make mistake when young, at least we can learn some valuable lesson and make more money in the future. :)

  4. Mkt price the reit for a good reason. So high dividend means stock price is low, thus dividend is high. Motley fool , really are fool indeed, it call upon investor not to look at the share price, but the dividend.

    1. Sometimes it can be painful if you just look at dividend yield... Well different people have different approach.

  5. Hi James,

    My philosophy about investment is diff from mainstream.

    One thing most of forget is that if u truly master the essence of investment, it widens our perspective in life, hel us in our temperament n be a wiser person.

    Short term stock paper losses meant nothing if u can feel how u have becoming wiser each day and the future is just so bright bcos of ur enormous wisdom awaiting to be unleashed.

    Portfolio, just like ourself need time to grow.

    I am sure u did now!

    1. Hi Rolf Suey,

      Yea, indeed! portfolio is like people, it need time to grow.

      However, it is inevitable for beginners or even some experience investor to do panic sell.