I’ve had time to reflect on my investment journey to date thanks to the Lockdown. The financial meltdown caused by Covid-19 led me to review my investment portfolio which I had pretty much left to run on its own. It’s one of those things that fell by the wayside as life got busy. I have come across a lot of people on social media who are keen on investing asking where to start and often asking  well known financial commentators and influencers if now is the time to buy and which shares to buy. Essentially asking for financial advice on social media.Those two things led me to write this blog post as a way to encourage those that may be standing on the sidelines wanting to start investing in shares and not knowing where to begin. It was also good for me to reflect on the lessons learnt, see how I can improve myself and what I can do differently with my investments going forward. One thing I am grateful for that the Lockdown has given me is the opportunity to pause and reflect, without worrying about being left behind. So what have I learnt from over 10 years of buying and selling shares in the stock market? 

1. Investing is not a team sport

Just as life is not a group assignment so too is your investment journey. If you were to meet with a financial planner/ advisor, they would first do a financial need analysis to determine what your specific financial needs are. This is necessary as our needs are not generic and they cannot solve for a problem they do not understand. There would be no need for them to set up financial goals that an individual would fail to meet because of their specific circumstances for example, due to limited or no surplus income as a result of excessive debt. An individual in the last scenario would have to first work on a plan to reduce their debt in order to increase their surplus income.

When I started on my investment journey, I did it on my own. From playing around with investment and trading platforms to attending free seminars and workshops on personal finance and investing offered mostly by financial services companies. My journey involved reading and doing research on companies I was interested in investing in using general newspapers, business and financial magazines.

Through this journey I got to understand the concept of personal development and why it is named as such. As it is specifically about you, no one is going to do it for you.

You must do the work and you cannot wait for your friend to have the money or to start investing. It is about your individual journey which is particularly private.

As I progressed on this path, I started an investment club with a group of friends, also investing in the stock market. There were 20 of us at the first meeting. By the third month four members had resigned. I recall that one of the members that left could not get her mind around how the club would be taxed. Others latched on to that problem and could not see the club beyond that tax issue that eventually they convinced each other that the investment club was too risky. The 16 members that remained stayed the course and realized significant gains at the end of the three -year investment cycle. This provided me with further proof that investing is about the individual, not necessarily about the group.

2. Just do it

The best way to learn something is to just do it! Throw yourself in it, read about it, and place that trade. Who knows what lies on the other side? Unless you start, you will never know. I see a lot of this on social media, people asking if they should start trading, when they should start trading. Should they open a trading account? As an individual you need to decide for yourself. Perhaps we have become so risk averse as a people that we want others to take that step for us. Again, life is not a group assignment.

The learning is on the other side and if you are waiting for the perfect moment it will never come.

I wrote about how I started trading shares a few months before the financial crisis in 2008 in my post here. It was scary to see my portfolio making such losses soon after getting into the market. But I did not know any better, so I stayed the course because the few books I had read by then had assured me that markets work like that, you just have to learn to ride the waves, the good and the bad. By the time I opened my trading account with Absa, all I had done was have a conversation with a colleague about which platform he used and why. He was doing it with friends in an investment club.

One day I signed up for a trading account and before I knew it, I was trading shares on the Johannesburg Stock Exchange. I made a lot of mistakes initially when placing orders etc. Eventually I learnt to plan and do the maths before placing the order so that I would at least know what the cash flow implications would be. Later when I changed stockbrokers to Standard Bank Online Share Trading, I learnt that they offered free seminars on navigating the stock markets. I could then build on the little knowledge I had accumulated from trading on my own. Suddenly a lot made sense and I could ask questions about specific challenges I was having with my portfolio or their trading platform. I also got to meet other humans who were on a similar journey. The point is that you need to just start, where you are, with what you have. The information is out there and is freely accessible to anyone who seeks it.

3. Don’t forget to take profits along the way

Me after taking my profits in my future life

When I started trading shares, I was very involved with my portfolio. I was that person who logged onto the trading platform daily to check for price movements and taking profits regularly. I changed this strategy along the way, for tax reasons mainly. As I evolved on my journey, I learnt that there was value in holding shares for longer because of the money babies that come in the form of dividends and the growth in the share price overtime. I switched from someone interested in taking profits to be a long term investor.

It is easy to call yourself a long term investor investor when the market is up. It is said that investing is about managing emotions, it is very psychological. I believe it because I have lived through it. As I mentioned earlier, I started trading shares just before the financial crisis in 2008. My portfolio was in the red most of that year. But the years that followed were good from a capital gain and dividend flow perspective. However, I became lazy in those subsequent years. I got comfortable with things being positive all the time. At this stage the psychology kicks in and you start thinking that that wave will continue indefinitely. But those who surf will tell you otherwise. Nothing rises or falls into perpetuity.

At some stage in my long-term portfolio (my basket of shares), I held MTN, Woollies and Aspen. I acquired Woollies and Aspen in 2012 and 2013 respectively.

I thought these shares were full proof, until MTN Nigeria caught up with MTN, David Jones with Woollies and Aspen’s debt caught up with it. When the first MTN incident was reported I thought, ugh, this is MTN, untouchable. I had an unconscious bias towards them, because I’d been riding the wave of good vibes only for such a long time. Then I started believing that the middle class’s income will continue rising, so of course Woollies’ share price would continue rising too. The reality is that you cannot invest in something and forget about it. That’s what happened to me. I probably could have exited all these three shares along the way, when they kept giving us the bad news in bits and pieces. I could hear the noise in the market, but I was too busy. Busy with work, the kids, you know the drill!

Eventually I exited Woollies at a small profit. I am embarrassed to say that I still hold MTN and Aspen in my portfolio today. God knows how long it will take for them to recover! The sad thing about these two is that my losses predate Covid-19.  My friends laugh at me when I tell them that in the past decade, I was busy making and raising my children, such that my focus shifted. As much as I was still putting money away and investing, I wasn’t paying attention, regularly reviewing my portfolio or following what was happening in the underlying companies I had invested in. I could have taken the profits in some of them sooner. And this is a lesson I have learnt now. There is no holding a stock forever. Forever is too long.

4. Past performance is not an indication of future performance

Adverts for investment products often carry a warning that past performance is not a guarantee for future results. One cannot assume that an investment will continue to do well in the future merely because it’s done well in the past. This is easier said than done, especially where you are your own investment manager.

Some of my losses in point 3 above could have been avoided had I heeded this advice. When I started trading Aspen was my go-to share, and because it was highly traded top 40 share it was easy to trade in and out of at a profit. After I changed my strategy to that of a long-term investor, I still included it in my portfolio picking it up at R225 in 2013. I exited in 2017 at a profit. In 2015 I added more Aspen shares, this time at R430 a share. No further research preceded the purchase other than my gut feel that it was a good company and that it had done well in the past. That story didn’t end as well as Aspen is currently trading at R109 a share. Whoever said that emotions are enemy number one when it comes to investing was right.

5. No one knows what will happen tomorrow

Neither economists nor market analysts can consistently predict the future or whether the market will rise or fall. No one knows what will happen tomorrow or can accurately predict the future. This gives me a lot of comfort and courage on my investment journey, the knowledge that even the experts do not always get it right. What they are good at is analyzing and understanding past events and market behaviour and extrapolating that into the future.

They too are human, just that they have tools that assist them in analyzing trends that inform their decisions and help them make better guesses about the future. So if experts do not have a magic wand it means that even simple investors can learn the principles and apply these to their own portfolios.

I started my investment journey during the financial crisis of 2008. Today we are dealing with Covid-19. Who knows how long it will take to recover from this one and where the markets will be tomorrow or in a year’s time?

What I know for sure is that change is inevitable. It will come when you least expect it. What you can do is prepare for it and ride the waves as they come. Take the good with the bad. And because we have seen the good days in the market before, we have no choice but to believe that they will return. Perhaps this is your opportunity to get in the market, when it is cheap. While some of us are feeling the pain of the fallen market, you can use this chance to buy in cheap and start learning about how the market works.

Think about it, some people are now forced to extend their retirement date because they can no longer afford to retire. You are in a fortunate position to enter the market cheaply and use the time value of money and compounding to your advantage while applying some of the principles mentioned above. The key is to have a plan. Your journey doesn’t have to include buying shares directly in the JSE; it could be investing via ETFs (exchange trading funds) or unit trusts that still give you exposure to the stock market.

Remember, your investment journey is yours; it will be different because it is not a group assignment. Is it not interesting that for every seller in the market there is a buyer? Each equally convinced that the timing is right to either sell or buy. Consider the recent collapse in Sasol’s share price in March where it traded at R20.77 a share from a 12 month high of R438 per share as a consequence of high debt and a decline in the oil price. There were many who sold that share in a panic during that time and those sellers were met by equally enthusiastic buyers who saw an opportunity.