Investing tips I would have loved to know when I was young

Investing is more an art than a science and often the more time an investor is invested in the market, the higher knowledge he/she can get from experience and the higher of returns. Unfortunately, when I was a young, nobody told me the “secret sauce” of investing which if I had known earlier, it would have changed my life. I share hereby simple and easy tips to consider.

This tip refers simply that it has more value to early invest and have a long-term strategy as opposed to predict which is the best moment to buy and sell following a short-term strategy.

Please note that even the most experienced investors never buy at the lowest prices and sell at the highest prices.

Conclusion: the younger you start, the greater your investing power.

Do not get distracted on investing in assets which are complex to understand or require avery specific knowledge (like commodities, bonds or structured products). The only asset class that has historically outperformed the inflation rate is Company shares. Buying shares in listed companies allow to benefit from share upside in the long term but also receive regularly dividends.

Conclusion: Buy shares in listed companies and keep them for a long period of time.

Taking excessive risks and invest in companies which are small or do not have a leading market position may prove the wrong strategy. Instead, invest in companies which have a strong market position, a well-known brand and a long profitability track record. Professional investors, such pension funds and asset managers buy these stocks to seek stability and recurrent returns in the long-term.

Conclusion: Do not forecast the next winner, it is easier to buy the current winner.

Human psychology plays a big role in a successfully investment strategy. In a nutshell, this means:

1. Keep calm and do not overreact.
2. Do not let emotions drive your actions.
3. Keep a long-term strategy.

Market shocks always occur but do not underestimate a company’s stock capacity to make gains or recover in the long run.

Conclusion: Be rationale, monitor the market and keep a long-term strategy.

Most of experienced asset managers do not achieve better returns than the main stock index. This proves that it is very difficult to build your own investing strategy and obtain better returns than the stock market. A winning strategy is to consider investing in ETFs (exchanged traded funds) replicating the world’s largest stock index in the USA and Europe.
The grail of investors is the ETF on S&P 500 or MSCI World shares which gives the opportunity to invest in the largest 500 companies in the USA at a very low cost.

Conclusion: Invest in ETFs and benefit directly from the main index returns.

There are plenty examples in history of “bubbles” that ended up bursting. Two clear examples are the dotcom bubble in the 2000 years and most recently the crypto assets bubble. The most experienced investors know when to sell and cut the losses although its not an easy action to digest, especially for unexperienced investors. Some basic maths show you that losing 50% of your investments means that you need to make a gain of 100% (double your money) just to get back where you started.

Conclusion: Remember that you never lose, you either win or learn.