How I Entered The Stock Market As A Beginner – Part 1

Hello, my name is Tjerk and this is my first blog. Last year around summer time I started investing in the stock market. I am currently a beginner, but during the last year I have learned a lot about investing and I thought it would be nice to write down my experiences and lessons. This way I am forced to reflect on my decisions and progress, and it might help out other new investors with their first steps.

My idea was to share the different philosophies I followed last year and share which ones appealed to me and which ones didn’t. But before I do that I want to make the obvious disclaimer that I am not a professional. So everything you read here is for entertainment or experience sharing purposes only.

Performance Last Year

So how did I do last year? The honest answer is, not well. I have lost around 20% of the value of my investments in the last 12 months. This means that if I would have kept my cash on my bank account, I would have been richer than I am today. If I compare the performance of my portfolio with that of the rest of the market, then I also did worse than the market, but not as bad as you might think. In the period I lost 20%, the whole market went down 15%. How the whole market is doing is measured by de MSCI All World (which is an index that tracks companies across 23 developed markets) or S&P 500 (which is an index that tracks the top 500 publicly traded US companies). Knowing this it means I ‘only’ did 5% worse than the rest.

Honestly, this is a hard fact to deal with, but I am now confident that every decision I am making from this point is helping me to grow my portfolio over time. I see the lost 20% as the tuition I paid for learning about the stock market. I also shouldn’t be that harsh on myself. I lost money, but so did the whole market. I could have made a lot of better decisions this year though. Through my blogs I’d like to share what I learned, so at least you won’t have to make the mistakes I made.

The Beginning

So how did I start out? My only process was that I looked at companies that I liked and ‘would not mind owning for a while’ and then bought them. I did not look at the company’s value and compare it to the share price, I did not diversify to spread my risk and I also did not fully understand in which situation this strategy (does not) work. I have found that all these factors are very important if you want your portfolio to grow in the long run.

During the second half of 2021 the markets mainly went up, and every time stock prices went up a little, I would sell these stocks. This strategy doesn’t let you fully profit from an upgoing / bull market, so I missed out on most of the potential profit. But when some of my stocks would go down (yes, Palantir), I would hold on to them until they were up again… some of them I still own (Foot Locker). Because I quickly sold my winners and held on to my losers, my portfolio wouldn’t go up. It is a good thing that I am learning this right now, when my portfolio is still relatively small and the impact on my investments and my future gains isn’t that big yet.

Conclusion

In my next blog I will share how I continued from here. Before I will end, I will share with you my main take-away points:

• Don’t use strategies you don’t fully understand.
• If you don’t know what a company is worth, then you also don’t know what to pay for it.
• Losing money is part of investing and something that will happen to you at some point.

Thank you for reaching the end. I hope you enjoyed reading it and can take something away from it.

Feel free to check out part 2 as well!