Find your way and press "Play" (Part II)
Let's take a few steps back. My investing career actually started way back in my school time. Actually, it was a trading career back then. In primary school, my friends and I found a new hobby in trading useless stuff during the school breaks. First we bartered marbles, stickers, stones and small plastic toys. Quickly, a real black market for all the shiny little objects developed and everyone just waited for the break to take out all the goods and to make the best trade. The peak of my primary school trading career was the sell of a common Pokémon sticker for 5 Deutsche Mark (real value maybe 0.1 DM).
Shortly after, teachers forbid the trading in school. In hindsight, this was my first investing bubble experience. At the same time, an actual bubble (the dotcom bubble) happened and as I learned later, my family lost most their net worth due to a "fail-safe" investing advice by a "friend" who convinced them to go all-in on a scam. To defend them, they grew up in a communistic system (GDR) which had just collapsed not that long ago. They were the perfect prey for these ponzi scheme sharks. Financial education was never even an option in the GDR. In fact for many things like insurance and pensions there was only one public alternative back then, so they never had to deal with personal finances.
I am quite happy that my parents told me about what happened but di not indoctrinate me that “the market is rigged”. On the one hand, keeping quiet about it would bear the risk that I might repeat the mistakes of my parents. On the other hand, drilling the risks of investing into me as a kid, could have easily scared me into never buying a single stock. Maybe the “golden balance” my parents chose to deal with the subject will save me a lot of money over the course of my life.
However, it was not due to my parents that I found interest in the financial markets. To be honest, I couldn't have cared less until I was a 8th grader. In "Gemeinschaftskunde" (social studies), we had our first (and only) financial education: A "Börsenspiel" (paper trading game) organized by a local bank. In hindsight, I have to say that calling this practice "financial education" in school should be forbidden by law. Paper trading games encourage short-term thinking, taking huge risks and trading on leverage to “win”. However, I also have to admit that without it, I would maybe never have become an investor. It is a double-edged sword.
I was in a team with my best friend and we actually won a small price in the local "league". I quickly came to the conclusion that we have to do this with real money (because we were so smart and investing was so easy!) but my friend argued:
"I would like to invest with you but we just have a few hundred Euro each and this is not worth it. A gain doesn't even move the needle in absolute terms."
He had a point. I did not like the idea of investing 500€ in a stock, paying 10€ trading commission just to sell for a 10% gain with another 10€ trading commission. So I researched and found the perfect solution for us:
Leveraged structured products! Knock-out certificates! Option certificates!
Long story short: We lost almost everything. The final investment we took was a Rhodium ETC which we more or less just bought and held to mark our “final capitulation” as short-term stock traders. Funnily enough, it went 10x in price until last year where we finally sold it. From this bad trading experience, I finally learned my lesson, never went back to short-term thinking again and became a rational long-term investor.
THE END...
That would be the story if I wasn't an idiot. Over the following years I traded stocks based on value and contrarian characteristics and landed a few good investments: Avigilon, Bakkafrost, Peugeot, MSCI Brazil, just to name a few. But these positive investments were all obliterated by occasional, short-term, leveraged "I am smarter than the market" trades: Shorting the NASDAQ twice, buying the worst performers of the S&P500 (Peabody and Cleveland Cliffs) and more. So I basically missed the biggest bull market of the century by messing around without a plan.
I knew I had to do something. I needed more information, I needed a plan! I finally stumbled over
Sven Carlin (https://www.youtube.com/channel/UCrTTBSUr0zhPU56UQljag5A) and
"The Investor's Podcast" (Preston Pysh and Stig Broderson, https://www.youtube.com/channel/UCPbMnGLeHscshhD7PAEnvbw)
on Youtube and was sucked into the world of investing once again. I can't emphasize enough which huge impact these guys had on me in hindsight. I am still blown away by educators like Sven, Preston and Stig and the sheer value they provided to the global retail investor community.
While over the years, I invested kind of half-hearted, these guys reactivated my passion. I learned about the must-read books like Ben Graham's "The Intelligent Investor". With each book, new doors got kicked open and new questions arose. I not only recovered my passion for investing but also my passion for learning.
Still, after each podcast interview, book or presentation, I always felt like: "Sure, these guys are good investors and know what they are doing. But how can I be sure they did not just have luck? How can I trust blindly in anecdotes of big investors and risk all my capital and my future based on their promises?"
I long sought a solution for this problem until Jim O'Shaughnessy threw it right into my face!
(More in the next part)
Kind regards,
Your Non-Prophet