Investing in the stock market for the first time: a retrospective (Part 1)

Investing in the stock market: the risk-averse saver

I have always been a good saver and back in the pre-recession days (of 2007) I enjoyed the benefits of getting a whopping 6% interest.  Not bad for low/no risk investment.

But since the crash, rates have never recovered and you are lucky to get a saver that offers 1.5 percent.  I felt like I was being punished for being a saver – watching my money gradually lose value against the rate of inflation.  I decided rather than blaming the system, I should start pursuing other options.

The stock market always made me feel a touch cautious, the fact that money I invested – my hard earned money, could be less or even disappear completely was daunting.

The media didn’t help either, quick to report when the share prices dropped (but not so much when it recovered) and trading websites were overloaded with ‘expert’ analysts using confusing terminology saying why a stock was a poor investment, it all seemed confusing.

I decided after sitting on the fence to make a relatively small investment that would not impact my life if things were to go bad.  And with that, I made the jump into the world of investing.

Education

To start I bought a book called How to read the financial pages.  I thoroughly recommend getting this book or a book like this that explains how the markets work in such detail.

Honestly, I did read it cover to cover, but as someone new to the area I started to find it really confusing, and as you’d expect a dry read.  Now I mostly use it as a reference book which I refer to when I stumble on a word I call FTB (Financial Times Bollocks).

 

Trading

After reading around, looking up the ‘household name brands’, I joined one of those play trader websites to get understand how buying stocks.  When I felt confident enough from this experience I made my first trades.

I decided to use the bank that hosts my current account as it appealed to me to have a trusted high street bank and the logic that when I logged into my online banking I would see all my assets on one screen.  Unfortunately, the stocks and shares section is a totally separate login

As part of this, I pay £10 for each trade, which is an additional cost to consider when reviewing share price (there are websites that do free buying and selling but I prefer having what I view as a reputable brand to do this).

What about them graphs huh?

When I first started my research I watched the market graphs like a hawk.  In reflection, I took too much value from these and naturally I saw green ‘up’ arrows as good and red ‘down’ arrows as bad.

I did spend much of my first year looking at the current daily share price and my logical brain, started to try and look for patterns:

“if x dipped by 20 pence and then rose back up and down several times then I shouldn’t buy now because it due to dip again soon”

This was my logic I took when I wanted to purchase more shares towards the end of my first year – I knew it was a matter of time that there would be a slump.

It turned out I was wrong and the share I stayed off purchasing has shot up by 100 pence.  Lesson learned, reviewing and analysing charts doesn’t make you an expert and it certainly not a way of working out the future.

The value of experts

Upon reading financial sites like Motley Fool I came to the conclusion that the experts were as clueless as I.  The cynic in me felt their aim is to keep writing articles on a wider range of stocks of possible so that they appear on the first page for any ‘company name’ share price search.

One of my first investments was in Netflix at 188 US dollars per share, I instantly regretted purchasing because all I saw where articles like: ‘Should investors be worried about Netflix?’, ‘Is now the time for Netflix Shareholders to sell their stock’

These were the experts and they were predicting doom!  I watched the share price grow and soon came to realise these articles were just finger in the air bullshit.

After my first year owning the shares my Netflix stock had doubled (and yes it did drop, but not to the apocalyptic levels made out by the professional sites).  Not surprisingly I view advice on investor websites with caution.

Part 2

Please see part 2 of this article where I talk about being a foreign investor, investing by passion, long-term strategy and how things went in the first year.

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Please note that this post is my thoughts on my first year investing on the stock market – I have not written this post endorsing any specific recommendations but to share my thoughts as someone who has no prior experience investing in the world of stocks and shares.

If you are looking at investing in stocks and shares then I recommend doing your own personal research.