When I was a kid, I was lucky to have amazing parents who always discussed interesting topics, especially at dinner. Driving to school with my dad was always special because he would teach me about various subjects like the difference between Protestants and Puritans in Elizabethan times or how to calculate standard deviation. At the dinner table, my parents often talked about their finances, which gave my siblings and me a little knowledge about finance and investing from an early age.
I opened my brokerage account the day I turned 18, as soon as it was legally possible. While turning 18 was significant for many reasons, for me, it meant I could finally invest my own money. In that first year, I made four major mistakes that clearly marked me as a newbie. In reality, I made more than just these four errors, but these were the most financially painful ones. Luckily, I didn’t make the mistake of using a simulation trading account.
I WAS TOO EXCITED
Like most 18-year-olds, patience wasn’t my strong suit. I was so excited about opening my brokerage account that I wanted to invest immediately. Within two days, I read a few financial articles and placed my first buy order for Nike stock, being a big sports fan. Unfortunately, within nine months, that stock dropped by over 50%. I was devastated both financially and emotionally.
The lesson for all new investors is simple: don’t rush into investing. Learn as much as you can before diving in. Had I taken the time to read books about investing and learn from great investors like Warren Buffett, I could have avoided this painful financial mistake. Patience is key to successful investing.
MY UNHELPFUL BROKER
Back in the days when full-time brokers were common, I had a broker who fit the “churn ’em and burn ’em” stereotype. He wasn’t a bad guy, but he was focused on generating commissions. Shortly after opening my account, he called me with a stock recommendation that he claimed was a “sure thing.” Despite not knowing much, I followed his advice. Needless to say, I was unhappy when he called me a week later with another recommendation.
For new investors, the message here is clear: never blindly trust your broker. Brokers often have conflicts of interest with their clients. They want to generate commissions, while investors want to make money. Many brokers recommend transactions that benefit them more than their clients. I eventually switched to an online brokerage service with lower commissions and no pushy brokers calling me at all hours.
I SPENT TOO MUCH MONEY
Even though I was raised in a frugal family, my initial approach to investing was anything but frugal. I spent thousands on investment DVDs, seminars, and became an easy target for marketers selling “trading models that will generate 80% per year!” On the bright side, I subscribed to newsletters written by serious analysts, some of which I still read. But out of the $4000 I spent, only about $300 was actually useful. While some information was good, much of it didn’t suit my personal investment style, leading to significant losses before I even placed my first trade.
The lesson here is to start small with your investments. When you’re new, you don’t yet know your investment style or what works for you. Instead of spending a lot on expensive resources, take advantage of the free investment articles available online.
I WAS IMPULSIVE
In the beginning, I was a discretionary investor, making decisions based on financial reports, stock price patterns, and gut feelings. This lack of a rigorous approach resulted in a