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Learn these 10 investing lessons before it's too late

Learn these 10 investing lessons before it's too late

Here's what I learned after working in finance for over 6 years.

April 19, 2023

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Now on to today’s piece 🤝

I’ve worked in finance for 6 years and have made 100s of mistakes in that time.

Here are 10 investing lessons I wish I knew when I started:

1. When to sell

There are 3 reasons to sell a stock:

You met your goal
Fundamentals changed
Found a better opportunity

Notice how each relates to your investment strategy.

And neither of them relate to the stock price.

The lesson?

The price of a stock is never a reason to sell (unless you’re trading).

2. How long to hold

The S&P 500 has never lost money in any 20-year period.

What does this mean?

If you held the S&P 500 for at least 20 years, you’re historically guaranteed to make a profit.

Remember this during bear markets and downturns.

It only takes patience to guarantee profits.

3. Your time horizon

If you don’t need the money for 10+ years it doesn’t matter what the stock market does today.

And if you need the money in 3-5 years, don’t invest in 100% stocks.

Your time horizon should dictate how you invest.

You shouldn’t invest then choose a time horizon.

4. Start early

Time, not money, will have the biggest impact on your investments.

Invest $200 a month from ages 20-60 and you’ll have $1,000,000.

But if you invest $200 a month from ages 40-60 and you’ll have $138k.

Waiting too long to invest is a million-dollar mistake.

5. Your investment style

There are tons of ways to invest:

Options
Day trading
Swing trading
ndividual stocks
Index funds/ETFs

What works for someone else won’t work for you.

And what works for you won’t work for someone else.

It’s okay to invest differently.

6. Understand your investments

If it’s individual stocks, understand the business.

If it’s index funds, understand the holdings.

When you don’t understand your stocks, you won’t recognize obvious risks. When you don’t recognize the risks, you won’t be able to mitigate them.

7. Price isn’t everything

Don’t base your investments on stock price alone.

They should depend on your:

Goals
Time horizon
Risk tolerance
& what stock it is

Capitalizing on low prices works for broad market indexes. But it won’t always work for individual companies.

8. Start with what’s familiar

If you’re not sure what to invest in, look at the companies you use.

Drink soda? $KO

Wear Nikes? $NKE

Shop at Costco? $COST

Have Amazon Prime? $AMZN

Investing in the brands you every day is a great way to start.

But eventually, you need to…

9. Understand the financials

Investing in companies you use is okay in the beginning…

But it’s not a long-term investment strategy.

The companies you invest in have to be quality companies, and you determine that by breaking down their financials.

Here’s a thread I wrote that simplifies the 3 major financial statements:

Balance sheet
Income statement
Cash flow statement

Here’s how to analyze a:
- Balance Sheet
- Income Statement
- Cash Flow Statement
Without a background in accounting:
— WOLF (@WOLF_Financial)
2:32 PM • Dec 21, 2022

10. The best investment

Sometimes the best investment is one you own.

You don’t have to add positions to your portfolio for the sake of it. If there aren’t any stocks you like or feel comfortable investing in…don’t buy them.