⚠️ Avoid These Whatever Age Bracket You Are In!
Here is a list of 8 mistakes that I have observed people make while investing at any stage of life, in particular while starting afresh at any age group. These are not sorted with any particular preference, you can make up your own priorities based on your circumstances. Here we go!
1 – Lack of Patience
For any investment 💰, it is a given fact that patience is the key to success. You cannot hop on and off just because of short term jolts. Just like you wont sell a house within 2 weeks because of the price dip of 20% for any reason, the same should be applied to stocks if the stock you purchased doesn’t have any fundamental issue – emotional and behavior bias should be under control while making such decisions.
“The stock market is a device to transfer money from the impatient to the patient.” Warren Buffett.
2 – Misunderstanding Compounding 📈
I uploaded a video on compounding last week where I mentioned how masses undermine such a powerful tool both for wealth generation and the experience which is compounded when you double down on your strengths.
Below tweet and the newsletter within tells the story of how compounding worked for me when I invest my time consistently for YouTube.
3 – Investing while having FOMO
With the things moving so quick – FOMO (Fear Of Missing Out) is natural. People nowadays are intimidated by friends and family members with their success stories in multiple instruments like 📊 stocks and crypto – however, everyone’s circumstances are different and one has to invest based on fundamentals and personal goals – not just because everyone else is investing.
4 – Not keeping taxes under consideration
This is true specially for South Asian expats 🌐 living in the gulf countries who are oblivious to what taxes are – although things are changing in this region too now with a lot of indirect taxes, still education about tax is missing. I uploaded a video specifically for gulf expats a few weeks back here – do watch that out.
In all cases, just make sure you understand investment related taxes like CGT (Capital Gain Tax) and the time frame it carries for specific investment. For example in some countries, selling a property 🏡 within 3 years might attract a huge CGT and can erode the profit you think you made with price appreciation.
5 – Not setting goals 🥅 & milestones
Often times when someone realize that they “have” to invest, they simply go ahead and find whatever options available at hand to invest without giving a thought on time horizon. It is utmost important to know the type of investment you are going for and the time horizon you are looking for.
Example: You simply cannot invest the education fund for your teenage child in stock market if they are just 2 years away from the the college.
6 – Not prioritizing outstanding loans
It is good to save and invest but if you have high interest loans on you specially a credit card 💳 debt then it does not make sense to keep on investing to gain 10% return on investment while you are paying exorbitantly high interest (in many cases 25%+) on your credit card debt.
7 – Failing to diversify
I have been advocating investing in stocks for Pakistan apart from property to diversify, but expats abroad should also look into the markets beyond Pakistan as well – this will give them a whole new experience and perspective on investing.
I made a couple of videos on my YouTube 📺 channel regarding how you can invest cheaply and conveniently through platforms like SARWA. Do watch the latest video on that topic here.
💡 For GCC residents: Invest in SARWA with this link and get $50 as referral bonus once you fund your new SARWA account: ✅ https://bit.ly/Sarwa-Wali
8 – It’s OK to incur loss (and realize it with grace)
It is utmost important if you fail 👎 in one investment – just realize it and move on. Two of the the biggest mistakes people make after incurring loss are:
Sleep over it and do not realize it in order to avoid the same in future
Become arrogant while not accepting the mistakes and continue taking the same steps due to ego.
Let me know in the comments if you have gone through one of these OR made a mistake of your own and how you think about it now?
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KEEP HUSTLING 😉
I do agree with all points but I like to mention my own observation, I had invested in stocks of perticular company as you already mentioned in JS momentum etf vlog, but I thought it will return to its previous price as of 4 months ago, but its price went up like never expected so I had purchased it again at 30 % higher price, dont know my decision will be right or wrong, but nut shell is that some time you should be proactive patience while investing at lower price dont always works
I 100% agree to your point – but I have one rule for such scenarios. Let me explain:
I keep a monthly budget for investing in stocks, lets say 100K per month. In case the stock market goes down after I invested 100K for that month and I am tempted to invest because I feel I can get value from low price, I will invest further 25K for that month and after that I would not come back to see the situation. The next investment will happen the next month.
This way I will save myself from behaviour base that we have for buying on dips – but the dip might get deeper sooner. One cannot predict the market – but one can create system of their own in case they are long term investor.
I am also long time investor, I had bought Shares of ubl and Hbl during ipo, when I was at university, but saddly could not follow it, now I am back with full motivation.
For trial purpose I had invested about 300K in different companies with different ratio.
In case of EPCL I had bought it at price @ 55, now its price is around 85, as per my analysis ( it could be wrong), its price wont get under 75, same is the case with EFERT, so some time we have to be proactive.
But in case of MCB I bought it arount 155, but price went down to 142 but now around 148, there is alot of momentum in engro subsideries, what is your openion will be fair price of EPCL & EFERT?
Engro is great, but for EFERT i always mention that I wont go above 20% of the overall portfolio due to inherent risk associated with concentrating on one company – same with EPCL, but still both are great entities for dividend income.
However, for EFERT, a couple of issues i can see are:
1: The gas prices and crisis which can dampen the growth.
2: The dividend payout is crazy – its greater than 100% from the profit. There might be an end to it.
Having said that, I still keep on investing on monthly basis as per my strategy.
Thanks for your reply,
One thing that I want to discuss is abomal price increase in case of EPCL this month, couldnt got any clue whats going on.
Do you have any idea?
No idea, but I yesterday was the dividend announcement – that has slightly arrested the price, but long term I am still bullish on it.