Interested in buying shares?
This episode is for you.
Following our popular episode earlier this year, in which we shared lessons from our ETF investing journey, we thought we’d do the same for our share investing journey, as there have been some differences.
Tune in as Kate and Owen share their mistakes and lessons from 10 years of share investing and offer insights into becoming better investors.
The losses and gains are magnified (compared to vanilla ETF investing)
While investing in ETFs still has risks, using a diversified portfolio of ETFs is very different to picking a few companies you expect to do well. While the potential gains can be profound, you have to contend with the downside.
I’ve had a company go into administration on me and basically lost my entire investment. Much more unlikely for an ASX200 ETF to go to $0 (would likely mean the entire economy has collapsed).
There’s a lot more to stay on top of
From ASX speeding tickets to annual reports and media storms, companies are dynamic, and things change all the time.
One of the biggest things to learn is what’s just noise and what’s going to impact the underlying value of the company (rather than just the share price over the short term).
Build your confidence by taking action
At the beginning of your journey, it feels like you need to know all the answers. But you’ll quickly learn that there’s a big difference between knowing something and taking action on something.
In the short term, it’s hard to know if you’re any good
In the short term, a lot of the share price movement is driven by market sentiment and significant economic events. Just because you started investing last month and your portfolios are up 10% doesn’t indicate whether you’ve made good investments.
A lot of people fell into this trap in 2020, when the market made a lot of people look like great investor, simply because a rising tide lifts all boats.
Excerpt from Why You Shouldn’t Pick Individual Stocks by Nick Maggiulli
I stopped picking individual stocks years ago and I recommend that you do the same. But, today I am not going to give you the traditional argument as to why you shouldn’t pick stocks, but a new one. The traditional argument, which you’ve probably heard many times before, goes as follows: since most people (even the professionals) can’t beat the index, you shouldn’t bother trying.
Instead, I am going to argue that you shouldn’t pick stocks because of the existential dilemma of doing so. The existential dilemma is simple—how do you know if you are good at picking individual stocks? In most domains, the amount of time it takes to judge whether someone has skill in that domain is relatively short.
Investing is hard, staying invested is harder
This riffs on something Glen James shared recently on the podcast “investing is easy, staying invested is hard”. But when it comes to the wild swings of share investing – I feel like “investing is hard, staying invested is harder” might be more apt.
There are now over 2,200 companies listed on the ASX, and plenty more in the US. Picking great companies is not for the faint-hearted.
You need a personal investment criteria
We know our investment philosophy – do you?
Owen’s 5-step share investing process
#1 – What does the company do?
#2 – Who runs the company?
#3 – What is the company’s moat?
#4 – Is the company in a growing industry?
#5 – What’s the company’s valuation?
Ultimate share investing checklist for DIY investors | Rask Education
