My main difficulties and mistakes in my trading journey - Part 1
Hello all! I am going share my main difficulty in stock trading, which has costed me more than 5 figures fee 5 years ago! However, thank for the mistakes and i managed to get through these difficulties, and in the last 2 years, not only I made all these loses back, and i manage to profit additional 5 figures of profit from the market. It is small sum to most of the people, but at least it gives me more confident!
Sometime, learn from other mistakes, is also another way to be profitable in the market. Avoid these mistakes definitely will make your journey smoother.
You may watch my video here for the fully animated version:
All videos were made by my blood and sweat. Please motivate me by giving a like! Also, if you find my information useful, please subscribe my channel too!
1. Mistake 1: Buy the stock based on dividend yield.
This is related to the "5th" difficulty: Have unrealistic expectations
This is related to the "5th" difficulty: Have unrealistic expectations
Initially, my aim to invest in stock is to receive dividend. Singapore stock is a heaven for dividend. I heard about REIT is a good investment with high yield, so i look for the REIT with the highest dividend yield. if we looked back the data, 2 years ago, $First Reit(AW9U.SG$ had a dividend yield of 20.6% in year 2020, and 32.45% in the year 2019! Decent? If you put $1000 in bank, your annual interest may be only 5 -10 dollars. If you put the same amount of money in the $First Reit(AW9U.SG$ , you can get $206 dollars instead! Which is 2000-4000% more than the bank. Incredible right?
Without thinking much, I bought it and happily waiting for the $$ to come. Dividend is a good source of passive income! That time, if i am not wrong, the price I bought was around $1.31.
After I bought the shares, the price falls from $1.31 to $1. Guess what, the yield was even higher now! And I think $1 was a good support, so I dollar cost averaged it.
Here is where the disaster started. $First Reit(AW9U.SG$ had so much drama and it keep dipping. During Covid crisis, it further dropped. To me it is ok, as that period was a critical period that almost all stocks went down. I was naïve enough to think that $First Reit(AW9U.SG$ is a healthcare REIT, the covid pandemic should boost its income, right?
A few months later, another healthcare REIT, $ParkwayLife Reit(C2PU.SG$ , had a V-shape recovery and reached new high. How about $First Reit(AW9U.SG$ ? It dropped even more! Now the price was around $0.5++.
Lastly, after I learn a lot more on the fundamental and how to analyze REIT, I decided to sell it and cut the lost. My net loss on $First Reit(AW9U.SG$ was around $2000.
Luckily, I managed to cut it as $First Reit(AW9U.SG$ later further plunged 40 cents, and 22 cents later. When i updated this post, it is now only at 30 cents. Luckily I cut it fast.
Yes, I got some decent dividend from $First Reit(AW9U.SG$ , but the capital lost was so HUGE that this dividend was like a dust.
What I have learnt?
Never look on the yield in investing. A stock needs to stay profitable to reward investor with dividend. If a stock is using high dividend yield to attract investor, this is a red flag alert. One recent example is $Hyflux(600.SG$ . A good dividend stock must have a consistent positive trend of increasing revenue and net profit. Fundamental of a dividend stock also plays a very crucial role. (3.40 – fundamental video) Instead of dividend yield, distribution per unit, or DPU growth is much important.
2. Mistake 2: Controlled by the emotion, not rational.
This is related to the "4th" difficulty: Take improper action in a trade.
This is related to the "4th" difficulty: Take improper action in a trade.
Look on the biggest market of the world, US. Do you notice that all three indices ( $Dow Jones Industrial Average(.DJI.US$ $S&P 500 Index(.SPX.US$ $Nasdaq Composite Index(.IXIC.US$ ) are always going up in a long term prospective? Indices is always going up because of three main factors: Population growth, inflation and index changes. Population growth creates more demand on the stock; inflation causes the money value decreases, which then increases the asset price like stock; index changes always replace a weaker company to a stronger one.
Then, why most people still losing money in the stock market? It is generally believe that 90% people lose money in stocks. How can it be?
Yes, macro-analysis, fundamental analysis and technical analysis are important in stock market analysis. However, I would say that emotional or physiological control on the stock market, plays a much bigger weightage to be profitable in the stock market.
For example, do you have this experience: You have done the research, wait for the entry price to be triggered. Ding! Then, you will find that after you buy the shares, it starts to tank. The red color makes you uncomfortable. After a weeks or even months, you are tired to see this stock never perform, or in a deep red color. You decide to sell it. The moment you sell it, it shoots to the moon.
If you experienced this before, you are not alone. I experienced this a lot and paid a lot of tuition fee to the market. After being cooked and prata by the stock markets, I summarized three important points to control and protect my emotion in stock market:
1. Never buy with FOMO (fear of missing out), and sell with PANIC
Using $Adobe(ADBE.US$ as an example. I have done the analysis and identify Adobe is a good stock. While I am waiting for it to dip deeper, it suddenly gap up. On the next day, it went higher again. I was feeling “Oh shit, I missed it, I need to buy it now!”, and I FOMO to buy it. Then, as you can see, $Adobe(ADBE.US$ consolidated for quite long time and most of the time I was in red, as I bought at resistance level. Until one day, I am impatience and closed it at a small loss.
2. Buy a stock after listen to a tip or read a news
The tip can be from media, analyst, financial report or even the Youtuber. It is fine to listen to those tips, but it is still very important to do our own research, and wait for the correct entry. Take $NIO Inc(NIO.US$ as an example. NIO day hold on 09Jan2021. Many reports and Youtuber then saying that Nio day would have a big surprise to push the $NIO Inc(NIO.US$ to $100 dollars or even higher. But let us see what has happened indeed: Anyone who purchased the stock during the Nio day, they are still suffering a loss.
Similarly, when $Pfizer(PFE.US$ released its news about scheduled a meeting with US Food and Drug Administration (FDA) on 10 December to discuss the emergency use authorisation (EUA) request for Pfizer and BioNTech's COVID-19 vaccine, many investors are being hyped and bought the shares. What happens next? Whoever bought the share during that day is still suffered a loss.
If we do not do enough research on the stock, any correction would induce fear on us and will cut the loss. It is very different if we have done a proper research on a stock, that we believe in it. Those who bought the share during NIO day, most likely already cut their loss during the sold off last few months ago. This is the same for those who bought the $Pfizer(PFE.US$ purely based on the news. Only the investor who has done a very extensive research on a particular stock, know its potential and value, its future driver, will be able to hold the stock up and down during the volatile period. And these are the people who can profit from these stocks eventually.
if you liked my content, please do my a favour by subscribing my channel here to motivate me.
https://youtu.be/G0nKldindz8
https://youtu.be/G0nKldindz8
I will continue the part 2 later. My next mistake, drew down my account for almost...70%!
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Tuyea : Good read
JM investorOP Tuyea: thank you!
MyHeadsAboveTheH2o : Thank you for sharing. Great info! I hate it cost you $ to find out, although I am glad you stuck with it and made your money back with profit.
JM investorOP MyHeadsAboveTheH2o: luckily I chose not to give up.
too bad there are many people gave up after suffered a lost
steady Pom pipi :
JM investorOP steady Pom pipi:
MoneyComesMoneyStays : My belief is if you're not willing to hold a stock for years then you shouldn't hold it for any more than a few minutes.
JM investorOP MoneyComesMoneyStays: absolutely agree with you!
Cool eagle : Great job! A very inspiring video & thank you for sharing your experience.
JM investorOP Cool eagle: thank you so much for your kind comment
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