A 3-Year Rookie Investor on Failure and Income
It's been over three years since I started investing in stocks. The first year was just a pile of losses. Looking back, the reasons for failure are obvious.
1. Buying based on the news. I was under the illusion that any good news would definitely drive prices up.
2. Averaging down. Even when the market kept falling, I couldn't think rationally and just put more money in.
3. Diversifying without a goal. I spread my investments across several stocks without knowing why I was buying them.
In my second year, I made some rules.
- Always set a stop-loss line.
- Do your homework before buying.
- Don't go all-in at once.
Since last year, I've finally started seeing small gains. In the end, emotional control seems to be the most important thing. I'm still learning, but my goal now is to stay steady even when losses come.
5 answers
Agreed. Averaging down is the scariest thing.
I've been investing for 5 years, but there was a time I bought purely on news and ended up taking a -40% hit before cutting my losses miserably. Since then, I've set clear stop-loss rules and try to avoid stocks that go up for no obvious reason. Emotional control really does seem to be key.
Well, isn't that only true for a bull market? Even if you've been profitable since last year, we're in a bear market now, so no matter how strictly you follow your rules, there will be losses. In fact, isn't diversification sometimes the riskier approach?