(ARTICLE) How Investing Has Taught Me Some of Life’s Important Values

Investing my money has led to investments in myself.

Having no background in finance whatsoever, I never imagined myself investing.

It was a concept so different to me that had no idea where to begin.

When I first started looking at the financial markets, It took me a month to fully understand the differences between a trader or investor.

Investing and trading is not like what you see in the movie Wolf Of Wall Street

It’s rarely the exhilarating adrenaline rush you get from a rollercoaster ride. It is like a rollercoaster in the fact there are ups and downs and it’ll be a bumpy ride.

Having been investing in the stock market for a few years, I’ve come to realise my financial decisions now are more driven by logic instead of emotion.

A philosophy that is easy to preach but difficult to execute.

I had hoped investing would be able to generate a small profit to supplement my life.

What I never expected was for investing to add value to my life, not only financially but the life lessons I have learnt through investing.

Here are four valuable lessons that investing has taught me in life and will hopefully provide benefit to yours.

Ego: It is more important to make money than it is to be right.

No one likes to be wrong. We would much rather be correct 100% of the time.

Therefore, we all have an ego.

Some egos are massive, others are small but either way, our ego gets hurt when our ideas fail us.

The stock market is emotionless, it could not care any less about your ego. When we are wrong, it shows us very clearly — you lose money.

Beginner investors have fragile egos. They have invested some much time researching the company before buying the stock, so they assume that it must go up when they buy it.

The stock market does not care about your thoughts and feelings.

We trade and invest in the hope of making money by predicting what will happen in the future, yet we overlook the simple fact that our prediction can be correct and the stock still loses value.

The Lesson:

In life, our ego restricts us.

Everyone is wrong at some stage in their life, but few people admit it.

Instead, we resort to excuses and build defensive barriers when we realise our mistakes.

Admitting our wrongdoings cause us physical pain. Having an ego is important, and even if you’re wrong, you may still win the argument — but at what cost?

Your ego remains intact, yet the same cannot be said about others’ respect for you

Get over your ego. It’s not worth hurting yourself and others around you to preserve it.

2. Greed: A small win is still a win.

Many traders and investors attempt to ‘predict’ the maximum a stock price will rise or fall based on historical highs and lows.

The common beginner mentality:

“This stock has reached £100 in 2018 so although I’m up 70%, I will keep holding because it must return to £100”

The stock market has no maximum or minimum price.

The irrational nature of the stock market means your wins can turn into losses — very quickly.

Don’t fear taking profit: a small profit is still a profit.

The Lesson:

When a small win comes along, take it — embrace it.

Take the time to appreciate the small wins in your life:

- Achieving a new milestone

- Loosing a few pounds of weight

- Adding a few pounds of weight

- Learning a new skill

- Getting out of your comfort zone

Etc…

Embracing small wins here and there brings you fulfillment. Always aiming to win big brings you disappointment.

3. Set stop losses: Know when to walk away

We make thousands of micro decisions on a typical day.

Most of these are mundane:

what to eat, what to wear.

But every so often, we are forced to make an ‘important’ decision.

In the stock market, the two most important decisions are when to enter the market and when to exit the market.

Entering the market is usually well planned: hours spent calculating the ‘best price’ to get into a stock.

When you should exit is the real challenge. You start panicking at the same rate as your investments falling.

Do you adopt ‘diamond hands’ and hold your resolve refusing to sell no matter how far it drops because you believe in your analysis?

Or do you have ‘paper hands’ where you sell at the first instance of price depreciation to avoid stomaching a heavy loss?

One of the golden rules in trading is to ‘not let your losses run’.

This means using stop losses; your position size automatically sells out when it goes below a set price.

So If you bought a stock for £10 and you set a stop loss at £8, your stock will be sold at £8 to protect your profits if the stock drops further.

The Lesson:

Stop losses should be applied to everyday life.

Often at work, people say ‘Yes’ to more and more responsibilities until their work pile is high enough to crush their mental well-being.

When we face conflict, walking away from an argument is an uncomfortable thought as we associate this with ‘losing’ the argument but if you continue, you’ll lose much more.

Know when to say no and/or walk away from something.

4. Patience: Overestimating what you can achieve in 6 months, underestimating what you can achieve in 2 years.

People of today have no time for patience.

They want results right now.

Warren Buffet net worth : $100B (yes with a B)

Patience is massively overlooked for success in the stock market.

Just invest consistently invest in index funds and chill TF out.

I automatically invest money each month into the S&P 500; I have never taken profit or sold out at a loss.

And I hardly look at my investment portfolio.

The Lesson:

Patience pays off — in the long term.

People spend more time finding shortcuts on how to achieve tasks or learn skills than dedicating time to learn a skill.

People do not become miraculously good at something without practice.

Malcolm Gladwell stated

“It takes 10,000 hours to master a skill.”

I’m not sure of the exact science behind the number but my point is you’ll only see significant growth after the patience of sitting through immense hours of dedication.

Closing Thoughts

In a world where more people are showing interest in ‘self-improvement’, we all want to better ourselves, both personally and financially.

When I read back through my very first set of investing notes, I realised how much I have learnt and how much more I still have to learn.

I’m still an amateur, but an amateur with patience and a capacity to learn.

Till next time