In the last couple of weeks I have some extra time on my hands. So I decided to do a little experiment. I asked 15 investors one simple question- what was the one thing they wish they knew before starting out in the stock market?
My idea is that the answer can be as long or as short as they want, the first thing that comes to mind. Often the first thing that comes to our mind is the most sincere one.
Also this is going to be a work in progress. If you are an investor and would like to be included, don’t hesitate to contact me with your quote.
Chuck Carnevale, FAST Graphs
Regarding your question, fortunately I had a great mentor that taught me what I needed to know as I started investing. His lesson was simple, he taught me to trust fundamentals more than irrational and volatile stock prices. Of course, by fundamentals I’m talking about earnings, cash flows, dividends and financial statements, etc. In other words, invest in the business, not the stock.
Chuck Carnevale is the founder of FAST Graphs and I am very glad he provided this piece of advice for you. If you haven’t, I suggest you try the 14 day free trial to his product. I am not affiliated with them in any way, but you can clearly understand where is Chuck coming from with this advice.
Looking at the underlying business allows you to detach emotions when making decisions. First you look at the business and then decide what price would you be willing to pay, not the other way around.
Nick, Sure Dividend
I wish I recognized the importance of following a systematic investment strategy where you invest the same amount each month
Something that is often overlooked when you start out- picking out a proper strategy. Often people are very confused once starting out as there is a lot of information available all over the place.
That’s why it is important to take a step back and develop a sound strategy. It’s going to save you a lot of headaches in the future.
Weenie, Quietly Saving
The only thing I wish I had known was to have started investing earlier in life!
As people say- the best time to plant a tree was 10 years ago. The second best time is today. There are plenty of guides here that can help you in starting today. You can start with the basics.
Evan, My Journey to Millions
I would say how powerful compounding is and how important it is to start as early as possible.
Absolutely agree with Evan’s advice. Compounding is often overlooked by many people. In the beginning it looks insignificant, but it really shines in the long-term.
Ken, Dividend Value Builder
Risk Management
Straight to the point with Ken and I agree with him 100%. Without a proper risk management you are inclined to lose it all at certain point. After all investing carries risk and you should never forget that.
That’s why we should assess our personal situation and build a portfolio in line with our personal risk tolerance.
Eric, Dividend Earner
Back in my day, ETFs did not exist but in today’s world, if I was a new investor, I would have liked to know about index investing as a simple way to get started, not be gauged by mutual fund feeds (which I was) and have market returns to start my investing journey.
Following that, would be to understand how to invest in dividend stocks for retirement income to avoid depleting my portfolio while beating inflation – dividend growth is the key here and usually has a lower yield.
Two great points from Eric. First we need to take a moment and appreciate how easy it is to invest today. We have things like ETFs, zero commision and fractional share brokerages like Freetrade, M1 Finance and many more. This gives you a chance to start investing with as little as a dollar.
And second- dividend growth is a crucial part of every portfolio. A lot of beginners make a mistake of chasing dividend yields, but not realising that the yield alone can change. That’s where the good research comes in hand- pick a good dividend growth stock and you will be happy for a long time.
Matt, The Working at Home Man
Investing isn’t just a look it up once, set and forget type of scenario, its a constant learning process. I would like to include this quote from Charlie Munger:
Warren Buffett has become one hell of a lot better investor since the day I met him, and so have I. If we had been frozen at any given stage, with the knowledge we had, the record would have been much worse than it is. So the game is to keep learning, and I don’t think people are going to keep learning who don’t like the learning process.
Investing, like everything else in life changes, evolves and goes through different cycles, completely agree with Matt.
Don’t forget that stocks are a part of a company. And business landscapes change constantly. Just because something works now doesn’t mean that it will work 10 years from now. That’s why it’s important to keep up with the world around us.
PoF, Physician on FIRE
How to better invest in a tax-efficient manner.
Or in other words- if you have access to a 401k, an IRA, an ISA or whatever it’s called in your country- make sure you are using it. It will make a big difference over the years.
Kanwal, Simply Investing
Start investing early. I only started investing when I was 27, I wish I had started 7 years earlier. At the time I did not understand the power of having time on your side. The earlier you start investing the better off you will be.
We are seeing a common theme from all those investors- how important it is to start early and Kanwal is 100% right in that regard. It doesn’t matter how much money you start with, it’s the habbit that matters.
All Income Stream
Long Term Investing is the way to go.
If I had to give you all one personal finance advice only it would be this. Nothing beats long term investing in the long term.
Ricard, Escaping to Freedom
The one thing I wish I knew was the power of compounding. I wish I’d understood how time is king and started investing earlier.
I think you are noticing a common advice from all those people and Ricard is one of them. So take their advice and use compounding to your advantage.
Keith, DivHut
The one thing I wish I knew before I started investing would be the power of dividend growth, time and compounding. I would have been more patient with one of my first investments and held on for the long haul instead of cashing out simply because of a nice capital gain.
Another mistake that a lot of beginner investors do, including me. I am talking about selling your winning positions too early. The goal is to find a solid long-term company and just let it be.
Nick, Side Hustle Nation
For me, there’s this weird paradox where every dollar is essentially meaningless, but the habit of saving it is everything. One thing I wish I knew when I started was to have a near-term goal in mind. Investing and saving for retirement is way too nebulous and distant to be motivating in the near term. So people tend to put it off.
That goal could be to “max out” your allowed contributions. That could be to set up automatic payroll deposits. That could be to begin to build passive cash flow.
For me, I’ve used a combination of the above, but most powerful recently has been the goal of building a “cash flow” portfolio in my taxable accounts. Start small, and grow from there. What would it take to earn $100 a month in dividends? $500 a month? $1000?
This cash-flow focus helped me get off the sidelines.
Great advice from Nick, that is actually something I am doing as well. I agree that it is hard to stay motivated for something that is going to take decades. This is also how I keep myself motivated- track my dividend income and see how it changes over time.
I would go one step further and advice you to approach a lot of things in life with the same approach- break everything down in small, attainable goals. It doesn’t matter if it’s a new language, getting in form or saving money. Break them down to weekly or daily goals and it will be much easier for you to keep motivated.
Dividend Growth Investor
My advice would be to find a strategy that works for your goals and objectives, which you can stick to.
And then you need to continue learning, and improving that strategy
If long-term investing can be summed up in a couple of words, those would be it. That is essentially what long-term investing is all about.
Derek, Life and My Finances
I wish I would have known how simple and effective index investing could be. After years of trial and error followed up by research, I now realize that index investing is incredibly cost advantageous, super simple, is often more profitable than mutual fund investing, and it’s a fantastic ‘set it and forget it’ form of investing. Now, nearly all my investments are index funds. They have great earnings, I’m highly diversified in the stock market, and I never worry about the future of my investments.
Great advice from Derek. ETFs are a solid pick for every investor, especially for beginners. There are all kinds of ETFs available today. You can pick a couple that suit your strategy and just keep on investing in them.
Money Grower
I wish I knew just how little money one needs to start investing. I had this misconception that I needed an entire Napoleon-like army to start investing. I thought that if I wasn’t making investments of £2,000 – £3,000 at a time, I will never become rich. What I didn’t realise is that entire armies are built one soldier at a time; so too is a financial arsenal. So even when I had £250, I should have just started investing and add to that investment over time
Absolutely true, you really don’t need much to start investing. I have said it before- we are living in the best times to invest in stocks. We have zero commission apps out there like M1 Finance or Freetrade.
They are also incredibly easy to set up, which means you can start investing straight away with as little as a dollar. What matters the most is your patience and constistency.
Ryan Scribner, Investing Simple
The one thing I wish I knew before I started investing was the importance of patience. Early on, I was focused on short term trading strategies like swing trading that were unsuccessful. I wish I could explain to my former self the importance of compound interest and the principles of long term investing.
A common mistake beginner investors make is strive for quick returns straight away and go for short-term trading or swing trading. But investing is a long-term game and quick returns often lead to quick loses shortly after. Very good advice from Ryan and I hope you don’t make those mistakes.
Takeaway
You might have noticed a common theme around all of those investors. They all come from different backgrounds, have different strategies and different goals. But there is one thing in common with their advices- start now, pick a strategy and keep improving along the way.
Summary
I think this was an interesting project, where we learned important lessons from seasoned investors.
All of them run interesting blogs on the topic and I often read them so I recommend you do the same whenever you have time. I decided to ask specifically them for a reason- they all know what they are doing and their advice have value.
Thank you all for reading, hope you liked that little research I’ve done. Don’t forget to join the newsletter if you want to keep updated for new posts, receive my favourite monthly information and also receive a free ebook on how to build a monthly dividend portfolio.