I didn’t really know what the stock market was until 1999 at the ripe old age of 17. That was the year my older brother introduced me to the world of trading stocks and investing by showing me his brokerage account. He had an online broker that let him trade stocks using our dial-up modem connection at home. At the time, the cheapest online trade cost $19.99 per order which we thought was good considering the brick-and-mortar brokers charge $30 to $50 per trade. Before online brokers, the wealth barrier to having an investment account was much higher and wouldn’t have been accessible to my 17-year-old self. My income at the time came from bussing tables!! There were large minimum investment requirements, and to make a trade, investors would have to call their broker. Other times, the broker would call them and recommend a stock to buy. The birth of online brokers finally allowed retail investors (regular people) to buy publicly traded companies without having a large investment account.
The summer of 1999 was when I really got involved in trading. I was out of school and my brother was hogging the only computer in the house on his investment account, watching CNBC in the background. I became curious to see what was going on, so I tuned in. I watched price movements on TV and kept clicking the mouse to refresh. (This was before real-time quotes where the quotes refresh automatically.) To make money in the market, the strategy was simple; “buy low and sell high”. When I stole a moment at the computer, I researched companies. I didn’t know a lot of financial terms because they were never taught in high school. Google was not yet mainstream, so I “asked Jeeves” about the companies and their stocks. I looked at price movements of these companies and industries by observing chart patterns published on financial websites.
Within a few days, I was ready to go with my recommendation and bought my first stock. In a matter of a few hours, the stock had jumped 15%. It was only about $150 dollars in gains, but I was pumped! I clicked refresh every 5 seconds to see its price movement because there was a lot of activity. It was ticking up… 16%, 18%..back down to 16%, and then up to 18% again. We were so shortsighted, but it was my first trade and I couldn’t contain my excitement. “SELL!” And we sold at about 18% gain, took our gains and called it a day. That was the day I learned how to make real money in the stock market.
I wish ALL of my trades were that successful. The truth is we remember our biggest victories and forget the many bad losses. Even when the sum of all the bad trades is more than the good trades. Over the years, I have had some very good trades and some very disastrous ones. I’d like to think I’ve learned after each trade, but like most of us, I am a creature of habit. I’ve repeated mistakes, but I’ve also repeated some victories.
Since 1999, I’ve been following the market regularly if not daily. I saw the dot.com bubble occur and burst. I saw what the market did after 9/11 and how for the first time, the market was halted for a week. I was a registered investment advisor near the peak of the housing bubble and during the financial crisis of 2008. I may not have witnessed the crash of 1987 (I was 6 at the time and still living in the Philippines), but I think I’m pretty familiar with how the markets work.
My big takeaways from the market and investing are as follows:
- The house always wins. Whether you make a winning trade or a losing trade, the brokers, the investment banks, and the exchange always take their cut from your trade.
- Only a small fraction of traders actually make it rich quick from the market. Those are the flashy headlines that make you think making it big in the market is easy by following whatever steps made them rich. There are so many factors influencing the markets, that it’s impossible to completely duplicate their success.
- The markets are efficient (for the most part). No trade is ever the same. Making money in the market takes a lot of work, research, diligence, patience, and luck.
If you want to be rich, don’t be a trader, be an investor. By this, I mean allow time to let your investments compound instead of constantly trading and trying to beat the market in the short term. Don’t worry about the day-to-day fluctuations in your investment account. Time is your greatest ally in your path to be wealthy. The sooner you take control of your finances, the better off you will be. Invest now, but invest for the long term.