I started investing in the stock market in my mid-20s during the dot.com bubble. I recently watched a video on Fox Business about a 16-year-old stock market whiz kid, Max Levin of Stockpicker 101. Evidently, Levin has been extremely successful trading stocks. I thought back on my success and failures trading stocks over the years. I know I made a lot of mistakes when I first started out. Timing was partly to blame. I became overly confident because of the bull market at the time. A recent article by Yahoo Finance pointed out that it’s the 5-year anniversary of the most recent bull market. The S & P hit a new all-time high. Even gold is trading a lot higher. It was trading at $942 an ounce on March 6, 2009 compared to $1,345 an ounce in 2014, according to Fox. I have been careful to protect my investment and retirement portfolios because I don’t want to repeat the financial mistakes I made when I was younger.
Expecting the bull market to never end
In the late 1990s, I never expected the stock market to suddenly correct itself. I made the mistake of spending more than $100 a share on companies that couldn’t stand the test of time. Some of the companies went down in value from $100 to just $2 in a matter of a few years. Now, I wait to purchase stocks at all-time lows instead of all-time highs. I stopped listening to the cliché that you shouldn’t time the market. Failing to pay attention to the times was my biggest mistake as a rookie investor.
Failing to protect from losses
Another mistake I made was being “naked” in stocks. I left myself vulnerable by not putting in stop losses. I now make sure my brokerage firm will automatically sell my positions if they dip below a certain point. In most cases, I will still be ahead even if the stop loss is triggered. In the 1990s, I had no way of getting back the money I lost. Buying and holding doesn’t work when companies go bankrupt or never return to their pre-crash levels.
Investing more than I could afford
I regret the fact that I invested too much money in stocks when I needed cash to pay for a home purchase, college tuition and necessities such as cars. I should not have allowed too much of my money to be tied up in stocks. I had to sell stocks at a loss so that I could afford to pay for bills. If I had been more prudent, I would have left more money in a money market account in case the market tanked. With stop losses, I also protect myself in case I need some of the money I have invested.
Although I can’t go back in a time machine to the late 1990s, I can be a more cautious investor in my 40s. It’s inspiring to hear about young people who are enthusiastic about investing in stocks. The key is to stay passionate about investing even when the next bear market gets hold of the stock market and claws it to death. It’s certainly not a game for the faint of heart.
More from this contributor:
Preventing a Bag lady Future
I Failed at Income Diversification
Investing Again After a 401(k) Wipeout