I would like to tell you my story, of how I did my first investment in the stock market. In 2012, while the economy was still recovering from the financial crisis, I was offered a full-time job from my employer. I rented my first apartment, equipped it with all furniture I needed, spent a lot of my money on traveling, and saved my remaining money in a classical savings account. I remember it was back in 2015, beginning of the year, somewhen in March, when the stock market grabbed my attention for the first time. Despite the financial crisis, that just happened a few years ago, all major indexes, like the S&P500, were already sitting at all-time highs again. I was impressed by the growth rates, that we had just discovered.
I decided to dive deeper into this topic, searched and educated myself a little bit through the internet, and finally opened a brokerage account. I transferred €500 into the account and started to buy my first shares of companies that I knew. I remember one of them was the german car manufacturer Daimler AG. But I was not very successful at that time, the stocks that I bought went down over a period of one or two weeks, thus my emotions kicked in, I sold all of my shares with a loss, and transferred my money back to my bank account. My journey had ended faster than I expected…
Why am I telling this story? Because I did everything wrong, that you can do wrong with my first investment, and I think some of you might benefit from the mistakes that I made. But what were these mistakes?
- I did not educate myself properly, before I started to invest my money.
- I choose the wrong broker, which charged insanely high order fees.
- I did not prepare myself emotionally for volatility in the markets.
- I did not do proper research about the companies, that I invested my money in.
- I decided to choose stocks, rather than a less risky and less volatile investment like ETF’s.
- I did not have a strategy and thus sold my holdings with a loss.
Due to that, I highly recommend you do some research, educate yourself and define a clear strategy for yourself, before you start investing your money in stocks. What are the goals that you would like to achieve? Are they realistic to achieve? Many online brokers or mobile brokers also offer the possibility to start trading / investing with a virtual account & virtual money, to get used to buying and selling stocks. Take your time until you feel comfortable and prepared to avoid doing the same mistakes that I did.
Learn How To Start Investing in my next post in the category “Investing 101”.