Investing Mistakes to Avoid: Common pitfalls and how to steer clear

Bryce: [00:01:53] Welcome to get started investing! In this podcast, we cover all the basics that you need to start your investing journey. Are you joining us for the first time or is this the very start of your investing journey? Well, before you dive into this episode, our feed is designed to go from the very beginning. So we strongly recommend you scroll up and start at episode one. If you're feeling brave and just want to dive in, though, don't let us stop you here at Get Started Investing feed. We unpack all the jargon and the confusing bits here, your investing stories with the goal of making investing less intimidating. And of course, along the way we like to have a good old time. My name is Bryce and as always, I am joined by my equity buddy Alec. [00:02:35][41.9]

Alec: [00:02:36] That's going to confuse me. I'm good. Look, I'm a little bit worse for wear for people that follow us very closely. Well, actually, people that just follow us on Instagram. We have been away for about a week celebrating your 30th. [00:02:52][15.4]

Bryce: [00:02:52] Yes. [00:02:52][0.0]

Alec: [00:02:53] People are probably sick of hearing your 30th start, not just your 30th. A bunch of your mates turned 30. We did a big combined thing. I was sick going into the weekend. I'm more sick coming out of it, [00:03:04][11.2]

Bryce: [00:03:05] Partied too hard. [00:03:05][0.0]

Alec: [00:03:06] This might be a Bryce Leske heavy episode today [00:03:08][2.7]

Bryce: [00:03:10] I'm fine with that. It gets a little short on time. Yes, it was a really fun, really fun week. So you have come off a little worse for wear. So take it easy this weekend and hopefully you'll be back raring to go next week. [00:03:22][12.1]

Alec: [00:03:23] So the lesson from that is you can if if you want to invest, you can still have fun. You can still have weekends away. [00:03:28][5.5]

Bryce: [00:03:29] Yeah, well, the markets are closed on the weekend. [00:03:32][3.0]

Alec: [00:03:32] No one there was doing the fire move, but [00:03:34][1.9]

Bryce: [00:03:35] I'm doing the fine. [00:03:36][0.9]

Bryce: [00:03:38] And look, the reason I did call you Alec is because I have recognised that there are a lot of people who might be joining us for the first time who will think that your name is Ren. And it's [00:03:48][10.2]

Bryce: [00:03:48] it's not. Yeah, but [00:03:49][0.8]

Alec: [00:03:49] that's always been the guy I know. [00:03:51][1.7]

Bryce: [00:03:51] But I just I just thought I didn't even know if you like people not knowing that your name is actually Alec. [00:03:55][4.2]

Alec: [00:03:56] I like people think he was throwing people in the road. [00:03:58][2.4]

Bryce: [00:03:59] OK, I [00:04:00][1.3]

Alec: [00:04:00] speak enough for two people. [00:04:01][1.3]

Bryce: [00:04:02] Yes. [00:04:02][0.0]

Alec: [00:04:02] Right now before we get stuck. Oh, well, let's let's talk about what we're talking about today. Um, so we are continuing with the theme of the these like investing chapters. We've done investing styles. We've done asserts this chapter that we're kicking off today is all about mistakes. [00:04:20][18.0]

Bryce: [00:04:21] Yes. Investing mistakes that we have done ourselves. Learn some hard lessons, also some mistakes that plenty of our community members in the Equity Mates community have also made. And I guess the idea is over the next couple of episodes, we're going to talk about the common investing mistakes with some examples in this one and then have a look next week at some cognitive biases. [00:04:43][22.4]

Alec: [00:04:44] Yeah, introduce what cognitive bias means. So don't worry if you're not familiar with that term. Yeah, but at the root of many in investing mistake is this idea of a cognitive bias. So this one, this episode we're going to have a bit of fun with. We went out to the community and we asked for some of their investing mistakes. We're going to share some of ours. We've tried to grope them. But, yeah, we'll talk about a bunch of investing mistakes in the next week. We'll build on that with a discussion around the root of many of these investing mistakes. [00:05:16][32.3]

Bryce: [00:05:17] Yes. So the key message that we really want to get across here is, well, firstly, I learn from what we're going to talk about, so hopefully you don't repeat the mistake. But the look, we've all made mistakes. Even Warren Buffett is still today saying that he's made investing mistakes. You will make mistakes when you start your investing journey and along the way. So don't let the fear of making them, I guess, stop you from starting. So we're going to try and touch on a few of the key ones that we've made so that you don't make the same. [00:05:47][29.7]

Alec: [00:07:30] Yeah. Now, I want to I want to start with a well well told story on Equity Mates and the story of my first mistake. But for me, there was a real lesson in there that I think is applicable for a lot of these mistakes. So for long time listeners of the show, they will have heard that my very first investment with Slater and Gordon, I lost ninety nine point nine percent of the money that I invested on, not so much so that I couldn't even cover the brokerage cost to sell it. And so I sat in my portfolio for a while until Slater and Gordon cleaned up their share register last year or the year before. That sucked. Yes, but then my second investment was A2 milk, and despite its recent troubles, it was an incredibly good investment for me. And I made more than I lost on Slater and Gordon and then some. And for me, the lesson that really came out of that, that I think is broadly applicable here is there's an asymmetric upside when it comes to investing. And what I mean by that is like you can make a lot more than you can lose. And every one of these mistakes, if you learn from them and you correct it and you keep investing, you can more than cover whatever you lost by making that mistake. Absolutely. [00:08:47][76.7]

Bryce: [00:08:48] That's the beauty of investing and talking about investing. [00:08:50][2.1]

Alec: [00:08:51] Yes. [00:08:51][0.0]

Bryce: [00:08:51] Upside is usually unless you're leveraging yourself, but you can generally always make more than you put in. Now, look, before we actually do specifics there, this one has come from a community member, Jade Kyle. It's not a specific mistake, but one that we always talk about on the show that applies to not only Jade, but many others. And that is not getting into the market earlier. Yes, opportunity cost gets started. [00:09:19][28.4]

Bryce: [00:09:20] I think about all those [00:09:21][0.9]

Alec: [00:09:21] years that we missed to like Google and Amazon and Microsoft, [00:09:24][2.9]

Bryce: [00:09:25] Apple, Apple AAPL of Apple. We could have done it. [00:09:28][2.6]

Alec: [00:09:29] Honestly, if you're a parent, the best thing you can do is get your kids investing when they're kids. Yes. [00:09:34][5.0]

Bryce: [00:09:34] Unbelievable. All right. So the first mistake. Well, the umbrella. The umbrella, I guess. The umbrella mistake. [00:09:41][7.1]

Alec: [00:09:42] What's the umbrella mistake? [00:09:43][0.7]

Bryce: [00:09:43] Not researching a company. [00:09:44][0.9]

Alec: [00:09:44] OK, well, let's just let's just signpost this. So, like, we had a bit of fun in the office yesterday, just throwing out as many mistakes as possible, getting mistakes from the community. But rather than just going through a random list we've tried to group them into like. Different themes, I guess, just to give it some structure, and so, yeah, the first the first, I guess, group of mistakes that we're going to talk about is [00:10:07][22.5]

Bryce: [00:10:08] not researching, not researching a company. So we'll we'll kick it off with a community mistake from Sam Miles. And he said that he saw a post in the Equity Mates community about their meteoric overnight rise of a stock with the ticker ask. So he did what every intelligent investor does and that's by it without doing any research. He bought it at three point sixty and then it plummeted back down to around 60 cents. Not long after that would hurt. His lesson was to not jump on hot trains and actually do some research. [00:10:42][34.6]

Alec: [00:10:43] That is going to be a recurring thing. [00:10:46][2.4]

Bryce: [00:10:46] Yes. But yeah, [00:10:48][1.5]

Alec: [00:10:48] everyone most people have had that that moment when they jump on the hype train. Absolutely. [00:10:52][4.2]

Bryce: [00:10:53] At that moment, [00:10:53][0.2]

Alec: [00:10:53] the whole time, it is a very enticing train [00:10:55][1.8]

Bryce: [00:10:56] ride. You jumped on the Bitcoin hype train [00:10:57][1.4]

Bryce: [00:10:58] ride at the top. [00:10:58][0.4]

Alec: [00:10:58] You think getting on the bullet train is enticing? If it go to Japan, just wait until you get enticed by the hype train. [00:11:04][5.8]

Bryce: [00:11:06] So underneath not researching a company, there are a few specific mistakes. And the first one that we think is not actually having a clear thesis. And what do we mean by clear thesis? We mean not actually having a reason that you believe in which you should buy the company. [00:11:22][15.4]

Alec: [00:11:22] Yeah, and I think so. Nick in our Facebook community shared this example, and I think this is a good example of having a thesis, but the thesis is not exactly relating to what you invest in. So he invested in a company, Ducks Dustan Water, which was a water and ASX listed water rights business. It did absolutely nothing, apparently, and still trading at the same price three years later. And he had a clear thesis around water. Generally, like water is a scarce resource. Water rights are going to become more valuable in Australia. But the thesis didn't directly apply to this specific company. So you had like an industry basis, but he invested in a company [00:12:07][44.5]

Bryce: [00:12:08] and it's like on the right [00:12:09][1.2]

Alec: [00:12:09] track. Oh, it definitely is. But it's like if your thesis is industry level, find like a sematic ETF or an industry ETF or something. Yeah. Because in every industry there will be winners and losers. And if you don't have a thesis on the particular company, you don't have a thesis on the thing you're investing. [00:12:26][16.8]

Bryce: [00:12:27] Yeah. So that's the mistake. Not having a clear thesis. The way to avoid that is to ensure that you know why you were investing in something and then also make sure that the company you're inve sting in, if it's at a macro level, make sure it matches that macro level thesis in a pretty clear and accurate way. Next mistake and not researching a company is buying a company that you just do not understand. This is a classic all time classic. [00:12:55][28.2]

Alec: [00:12:56] Everyone. Everyone's done this. [00:12:57][1.3]

Bryce: [00:12:57] Everyone's done it. [00:12:58][0.6]

Alec: [00:12:58] And there's two things to this. There's probably the first one is buying a company when, you know, you don't understand it. And the second [00:13:04][6.4]

Bryce: [00:13:05] thing is [00:13:05][0.3]

Alec: [00:13:06] the following, you know, stip or news or stock tip. The second one is thinking that you understand the company, but then realising that you don't. Yeah. And that one is a lot harder to realise until you've realised you've made a mistake. [00:13:21][15.6]

Bryce: [00:13:22] Yeah. And this is a tricky one because it's similar to the having a thesis and you you know, you think, OK, lithium. All right, that's a macro trend. All right, let's buy a lithium miner, 10 lithium miners to choose from or I'll choose the biggest. But do you actually understand lithium production? Do you understand what drives the costs of a lithium miner? Do you understand what goes into their, you know, profit and loss? If you don't understand all of those things, then to your point, you need to be looking much higher. [00:13:53][30.8]

Bryce: [00:13:54] Yeah, yeah. [00:13:54][0.5]

Alec: [00:13:54] Or like you say and this is a this is a poor example because it's an incredible company. But like you say, iron ore demand is at an all time high. I want to invest in iron ore miners and then you've got a mineral resources because they might some iron ore. Little do you know that the majority of their revenue comes from oil processing. Yeah. And I mean, that example is poor because it's still tied to the price of iron ore. But it's about understanding like what the company does, how the company actually makes money. Well, you know, maybe another example is Tesla, where the reason they're profitable isn't because they sell cars at a positive margin, it's because they sell regulatory credits. Yeah. [00:14:39][45.0]

Bryce: [00:14:40] Yeah. [00:14:40][0.0]

Bryce: [00:14:41] So a mistake by a company you don't understand. Make sure you understand what it's doing. The next one is this is a good one. Not understanding the competition against companies that you're investing in. [00:14:52][11.4]

Alec: [00:14:53] Yeah, companies can be great, but if there's a better company out there, then it may not work out. So someone in the Facebook group, Dale, put a put a one of his stories in there that we thought illustrated that well. So we bought a small biopharmaceutical company, Benitec, that had a promising RNA treatment for hepatitis. Everything looked good. He actually quadrupled his money. But then Johnson and Johnson, the one of the big big hitters in the pharmaceutical industry, released a competing treatment and blew him out of the market. Tough. Yeah. Yeah. And so, you know, everything can be right. Your faces can be right. The products can be good. But if you're not aware of who else is competing in that market and what they're producing, then it could all fall apart. [00:15:41][48.8]

Bryce: [00:15:42] Absolutely. The next one and every I'm sure, you know, 99 percent of the community have done this. I've done it. And that is following a stock tip. [00:15:51][9.0]

Alec: [00:15:51] Yeah, this is this is the one we had the most examples for. [00:15:53][2.3]

Bryce: [00:15:54] It's a classic. It is an all time classic. I am foul of this one. We had a mate who [00:15:59][4.9]

Alec: [00:16:00] shall remain nameless, shall [00:16:01][1.0]

Bryce: [00:16:01] remain nameless, you know, and I make that we respect and is is intelligent and came to us with a I would say a specky stock tip. [00:16:13][11.7]

Bryce: [00:16:14] But and it wasn't speaking the game. [00:16:15][1.7]

Bryce: [00:16:16] It wasn't Specky McGee. So the story goes that he came with a stock tip. He had said that he'd even met with the management of this company. He had the presentation from the management that he flicked through, you know, saw great potential X, Y and Z. This all came through in about a ten minute conversation, very convincing. So put my money in. And it subsequently did nothing except to lose me money. What I found was the biggest mistake, though, is people love to give you a stock tip, but they never tell you when they sell or or when they get out. Yeah. So here I am holding this thing for. Way too long, I message my mate, you know, look, when are you going to get out of this thing? Oh, man, I got out of that thing [00:17:05][49.4]

Bryce: [00:17:05] years ago and it's just [00:17:07][1.5]

Bryce: [00:17:07] like, come on, you're throwing out stock tips, but you're not giving them you're giving us a heads up on when we get out. So, look, massive lesson learnt. I have never taken a stock tip since that point in time. And I think really that that story covers not only taking a stock tip, but not understanding what the company does and not having a thesis. So it's all of the above. [00:17:28][20.5]

Alec: [00:17:28] Why we groveton together. [00:17:29][0.6]

Bryce: [00:17:29] That's all great. [00:17:30][0.4]

Bryce: [00:17:30] And together. Yeah, but look, I'm sure there are plenty of other stories out there, so [00:17:34][3.8]

Alec: [00:17:34] we've got heaps more of those following. We've got some examples for all of these. We probably don't have time to rip into all of them. So maybe we'll do some social posts around them. We'll only use first names we won't name and shame anyone. A couple more in not doing your research. Flomo investing. Yeah. Fear of missing out something that you're quite guilty of. [00:17:54][19.8]

Bryce: [00:17:55] Not really. [00:17:55][0.3]

Alec: [00:17:57] Uh, Michael in the Facebook group, uh, told us about his second and third investment, where he both of them he bought due to foamer when he saw their share prices rocketing in one day. Turns out he bought both of them at the peak and they went downhill from there. And, you know, I'm pretty good at not investing for money, but, God, it sucks when you say, like, points about jump, you know, 80 percent in a day or like, you know, some of these companies just jump up and you're like, damn. And I knew about that company. I was thinking about that company, but I didn't invest in it. But it is once it makes that big move, you might be to close your eyes. [00:18:37][39.3]

Bryce: [00:18:37] Yeah. Get out of there. [00:18:37][0.6]

Alec: [00:18:38] And the last one around, not doing research, catching a falling knife. Yeah, a very jargon, heavily used term in investing, investing jargon. So when you say catching a falling knife, it's basically you say a stock has fallen. You think, God, it looks cheap here. I'm going to buy it because it's cheap. It's got a rebound, but it doesn't rebound. It keeps falling. And someone Ainslee in our Facebook group shared the story where she bought Telstra shares because they were down. She thought they would have to rebound. But unfortunately for Australia's biggest telco, it keeps falling down and she's down almost 50 per cent on those shares. [00:19:15][37.0]

Bryce: [00:19:16] Yeah. So, look, the moral of the story here really is there's plenty of reasons that you can make mistakes around not researching a company. And as we said at the start, it is highly likely that you will make some of these mistakes. We have certainly done so. The key is to try and avoid them by actually doing a bit of research before you invest, having a clear idea in your mind about what the company is, why you're investing in them, not worrying about what your mates are saying and sticking to your guns. I think those are probably the key takeaways. We'll cover a lot of that in the next episode with cognitive biases. But let's let's move on to the next mistake. [00:19:55][39.4]

Alec: [00:19:56] The next group of mistakes is falling in love. And oftentimes falling in love is not a mistake. But as an investor, it can be. You got to be you've got to be ruthless and analytical when it comes to your investments. So the probably the biggest mistake here is falling in love with the company and not selling it to spite. The reason that you're buying it not being true anymore. So your thesis is broken. The reason that you bought the company in the first place doesn't hold. But you like the managers so good. I love what this company does. It's changing the world. And so you're like, I'm going to hold on, rookie. [00:20:35][39.5]

Bryce: [00:20:36] You don't want to a mistake. Yeah, yeah. [00:20:38][2.1]

Alec: [00:20:39] David Einhorn, who's a famous New York investor billionaire, has a rule. It's called the no broken thesis rule. And you have to when you pick a stock, you have to say, why are you buying it? If that reason no longer holds, you have to sell. No ifs, no buts, no maybes, no no new justifications. It's a thesis. The original thesis has broken out. [00:21:00][21.8]

Bryce: [00:21:01] Yeah, well, that makes sense. Yeah. The other part of Falling in love is this is a classic as well, waiting for a company to get back to your purchase price and that's really falling in love with your ego in some way. It's the purchase [00:21:15][13.8]

Alec: [00:21:15] price it's anchoring, which we'll talk about in cognitive biases. Yeah. Yeah. [00:21:19][4.1]

Bryce: [00:21:20] Oh, I'll sell when it you know, it might dip, I'll sell when it gets back to Avon and I won't have lost any money. No, absolutely. Rookie, there's no guarantee of that. That is a mistake. And we will discuss how to avoid that in our next episode. But just be aware that if you are currently in that position, waiting for it to get back, you really need to think about what you're doing on that. [00:21:44][24.8]

Alec: [00:21:45] On that vein, I'm going to slip another one in here that we had later, but it's similar around anchoring to a price. You know, one side of that is I'll wait for it to get back to what I bought it at. The other side is it can't get any. [00:21:59][13.9]

Bryce: [00:21:59] Lola, oh, that is an absolute classic as well, it can't get any lower. We had a community member, Ahran, give us his story, where he bought a stock with no research over a decade ago in the geothermal energy field. He saw two consolidation's multiple cap rises and pardon the jargon there, but the average buyer price for him ended up being around 50 cents after multiple purchases throughout the years. It then hit zero point zero zero one cent a couple of times ended up selling it. And, you know, it really just was a loss of six months of salary. So, look, the lesson there is it can't go any lower. His stock went to zero point zero zero one cent. These things can just keep going. [00:22:55][56.1]

Alec: [00:22:55] Well, I mean, they can go to zero. [00:22:56][1.0]

Bryce: [00:22:57] They can go to see [00:22:58][0.6]

Alec: [00:22:58] if it's not a [00:22:59][0.6]

Bryce: [00:22:59] zero. If a company [00:23:00][1.4]

Alec: [00:23:01] has a share price, it can go lower. Yeah, so and people often say shares at one cent. This is really common in the crypto market. It's one cent if it goes to two cents, all of the money. But like it doesn't work like that. It's just as hard for something to go up one hundred percent as it is, you know, at whatever level. Yeah. It's not just because it's a low share price doesn't make it easier for it to go up. [00:23:27][26.1]

Bryce: [00:23:27] Yeah. Going from one hundred two hundred is the same as going from one cent to cent. Yeah. [00:23:33][5.6]

Bryce: [00:25:36] All right, Ren. You know, there's a reason everyone invests and that is to make money. However, a lot of people start the game and try and do it very, very, very quickly. We try we try here on Get Started Investing feed and over on Equity Mates to drill in the point that you get rich, slow, [00:25:53][16.7]

Alec: [00:25:54] deferent, try and get rich slow. You just might do it. [00:25:56][2.7]

Bryce: [00:25:57] Yes, but trying to get rich quick is a mistake in our eyes. And a lot of people try and do it. [00:26:03][6.1]

Alec: [00:26:03] Yeah. Now, one of the most common ways that people try and get rich quick is overtrading. [00:26:10][7.3]

Bryce: [00:26:11] Overtrading. What do we mean by that? [00:26:13][1.3]

Alec: [00:26:14] It means you think about the wolf of Wall Street. You think about Wall Street in the movie. You think about trading desks full of people yelling into phones by cell by cell. You think of trading setups you see in maims and on TV with multiple screens and charts and all that stuff. And you think that's what investing is. And you buy and you sell and you buy and you sell all day, every day trying to make money quickly. [00:26:40][26.1]

Bryce: [00:26:40] Why is that a mistake? [00:26:41][0.5]

Alec: [00:26:42] Well, number one, it's incredibly hard to beat the market. And number two, you incur a lot of fees, but number three is you're not. Owning companies and letting them grow into their value, you're just trying to play the psychological game of what the market's giving you and yeah, some people do it well, but you're competing against supercomputers and people with more information and more experience than you. Yeah. [00:27:12][30.2]

Bryce: [00:27:14] Second mistake in trying to get rich quick category is to use leverage, in other words, is to borrow money to put into the stock market to try and accelerate your returns. Now, if you're an experienced investor, there is some advantages in safely borrowing money to invest. However, if you're using money from a credit card, if you're taking out a personal loan at 15 percent interest, [00:27:38][24.6]

Bryce: [00:27:39] not that is [00:27:40][0.7]

Alec: [00:27:40] that is a funny example that you [00:27:42][1.2]

Bryce: [00:27:42] use as [00:27:43][0.8]

Alec: [00:27:43] well, because someone in our Facebook community did exactly [00:27:45][2.4]

Bryce: [00:27:46] that. [00:27:46][0.0]

Alec: [00:27:46] That hurts. Yeah. Which I think you need to take down. [00:27:49][2.8]

Bryce: [00:27:50] If you are [00:27:51][0.4]

Bryce: [00:27:52] doing that and then blindly taking bets on the stock market, it can go horribly wrong and south very, very quickly and you can end up losing more money than you actually put in. [00:28:02][10.7]

Alec: [00:28:03] So I think that's the critical point that we should just sit on for a second. If you're like me and you make a bad investment in Slater and Gordon, you lose your money. But it's the money that you have. And that's okay. If you if you get leverage, if you borrow money and you lose it, you can lose more than you started with and you end up owing the bank or owing the person that loaned you the money in debt. [00:28:25][22.0]

Bryce: [00:28:25] Yeah, and that is not good. [00:28:27][1.4]

Alec: [00:28:27] So that's the first problem with leverage that you may end up owing money you lose more than you have. The second problem is this interest rate question. So you mentioned the 15 percent ADRO in our Facebook group told us a story about how early in his investing journey he got a 10 grand personal loan, 15 percent interest to put into a managed fund. Now, what's the average return of the stock market [00:28:53][25.7]

Bryce: [00:28:54] over how many? [00:28:54][0.4]

Alec: [00:28:55] You know, annually? [00:28:55][0.3]

Bryce: [00:28:55] Annually, about 10 percent. [00:28:57][1.3]

Alec: [00:28:57] Okay, if you can get 10 percent, but you have to pay 15 percent interest on the money. Would you don't [00:29:02][5.0]

Bryce: [00:29:03] know you're losing [00:29:03][0.4]

Alec: [00:29:04] money. You're losing money. Yeah. [00:29:05][1.4]

Bryce: [00:29:05] So even though you're getting that juicy 10 percent return. [00:29:08][2.7]

Alec: [00:29:09] So that's the other problem with leverage. The first problem, you can lose more than you have. Second problem is you need to make sure your returns cover your interest payments. Yes. [00:29:17][8.6]

Bryce: [00:29:18] So the third mistake in terms of trying to get rich quick comes from having a lack of patience or selling too quickly to try and lock in those profits or maybe get a loss off the table. [00:29:31][12.8]

Bryce: [00:29:33] This one [00:29:33][0.2]

Alec: [00:29:33] hurts. [00:29:33][0.0]

Bryce: [00:29:34] Yeah, this one does hurt and patience. This has probably been my biggest learning throughout my journey of investing, and that is patience and letting companies do their thing over a long period of time. And there's no better example than Afterpay, I would suggest, for a lot of people in our community. Lisa, she says there's just another Afterpay tragedy bought in March 2019 after seeing Nick Molner, who is the founder and CEO. And I don't think you say, oh, but he's one of the founders speak at a conference. She then freaked out and sold at March 2020, which was the Covid drop. I'm assuming it was down near the nine point mark, which was the bottom, probably [00:30:21][46.8]

Alec: [00:30:21] a loss for her, which, [00:30:22][0.9]

Bryce: [00:30:23] yeah, [00:30:23][0.0]

Bryce: [00:30:23] would have been a loss. And as she said, it was an absolute rookie mistake because the stock then went from about nine point to one hundred and sixty at its peak not too long ago. [00:30:32][9.3]

Bryce: [00:30:33] So that would hurt that really. [00:30:35][2.6]

Alec: [00:30:36] How about this for hurting Ankush in our Facebook group bought 15 grand worth of Tesla shares at around forty five dollars a share, sold them for sixty five dollars a share, made about a K on the trade. Not bad. Not bad. Tesla has had a stock split in that time. Yeah. And is now trading at six hundred dollars a share. Yes. [00:31:01][24.8]

Bryce: [00:31:02] That hurts. [00:31:02][0.4]

Alec: [00:31:03] That hurts. That would be what are a few hundred shares worth a few hundred grand at this point. [00:31:09][6.7]

Bryce: [00:31:09] Yeah. Two hundred and twenty five thousand GS. [00:31:11][1.6]

Alec: [00:31:11] Quick maths from you here it. [00:31:13][1.8]

Bryce: [00:31:15] Yes. I think the lesson here is, is twofold. It's Yeah. Selling too quickly but it's, it's, it's hard. You shouldn't be, you shouldn't be kicking yourself for making a profit like you know, he's made an AK trade. You can't, you don't have a crystal ball and look into the future. But it if you're selling just to lock in a profit, but your thesis for buying hasn't changed. Why ask yourself why are you changing if you bought Tesla thinking it's going to be the leading electric vehicle car manufacturer in 20 years time and you bought it in 2019 and sold it the year after. Why are you selling that? If it if you still believe you think it's going to be the leading. Electric vehicle manufacturer in 20 years time. [00:31:57][41.3]

Alec: [00:31:57] Yeah, if you think that, like Volkswagen is doing better than Tesla and your face is just broken. That makes sense to sell. But yeah, if your face isn't broken. [00:32:06][8.9]

Bryce: [00:32:06] Yeah, let it play out. [00:32:07][1.1]

Alec: [00:32:08] This lack of patience is a is a real, real one that you are known for. That's why you're known as the bad doctor. [00:32:14][6.5]

Bryce: [00:32:15] No, because you've got no patience. [00:32:17][2.5]

Bryce: [00:32:19] That is a shock. That is a shock. All right, let's move on. Risk management. Tough to do as a beginner investor risk management. [00:32:28][9.0]

Alec: [00:32:29] It's a big term, but there's some simple steps that everyone can take and probably intuitively understand. [00:32:35][5.7]

Bryce: [00:32:36] And the first one is investing more than you can actually afford to. And what we mean by that is not borrowing money to invest. [00:32:43][7.6]

Bryce: [00:32:44] But although [00:32:44][0.2]

Alec: [00:32:44] that is one way to [00:32:45][1.0]

Bryce: [00:32:45] do that is one way to do it. But it's putting money in the market that you may need to be drawing on later in life or within the next couple of months to pay carajo or to pay for a holiday or to pay for fees to go to the doctors. [00:32:57][11.9]

Alec: [00:32:58] Well, let's let's talk about some examples from our Facebook show. So Broch, his first investment, bought a couple of shares, spent most of his savings on it, and then a few months later, he got a couple of speeding fines, had to sell the shares at a loss to cover the fines. [00:33:17][19.6]

Bryce: [00:33:18] Yeah, that's right. [00:33:19][1.0]

Alec: [00:33:19] To have an emergency fund. Yes. Daniel, another example he bought next day, say had a solid thesis for it. The price started to move in the right direction and then he had to sell it to buy an engagement ring. Congratulations, Daniel. But next day, say, continued running and he would have doubled his money if he stayed in it. Got to have [00:33:45][25.3]

Bryce: [00:33:45] the cash side for [00:33:46][0.9]

Bryce: [00:33:46] that. [00:33:46][0.0]

Alec: [00:33:46] And hopefully you're engaged. So congratulations. But should have been saving cash and not putting it in the market. [00:33:53][6.7]

Bryce: [00:33:53] Yes. Two great examples of not putting in what you can't afford, honestly. [00:33:58][5.0]

Alec: [00:33:59] Just do what Bryce does and never get engaged because that money could be better spent in the stock market. Sure, sure. [00:34:05][5.8]

Bryce: [00:34:05] That highly illiquid to close out risk management, not keeping track of your investments is another one that you know, it's okay to not look at your investments for a month, but just be on top of what you are invested in, particularly if it's individual companies. You know, we do a review every sort of quarter and have a look at how everything's going. But you should be tracking what is going on. [00:34:32][26.7]

Alec: [00:34:32] There's there's two there's two elements that the first one is exactly what you're talking about. The ones you've bought it have like a routine to check it, don't check it every day because they'll just create head noise but have a routine way, do it quarterly. Some people do it monthly. So that's the first one. The second one is keep track of why you buy stuff. Have a Google doc like I do have an Excel spreadsheet like Bryce does have a pen and paper notebook. Write down why you're buying stuff. Keep track of it. [00:35:01][28.8]

Bryce: [00:35:01] Yeah, absolutely. And then also you can manage risk by diversifying and a mistake that often a lot of people get into is going too hard, too early on, once one or two stocks and burning those bridges pretty quickly and getting put off so we would suggest start small, start wide and then become more confident as you go. Yeah. Alright. So to close out, we've got some other common mistakes that we will do a bit of a rapid fire here that didn't fit into the umbrella's above but we think are worth taking note of. So just like trying to catch a falling knife Ren trying to time the market is a classic. [00:35:38][36.2]

Alec: [00:35:38] Yeah it's a classic try to analyse charts and volume and all that stuff. Some people do it well, but it is incredibly hard to do. And a lot of people have left a lot of returns on the table because they haven't started investing because they thought it was the wrong time. [00:35:54][16.4]

Bryce: [00:35:55] Yeah, it's not about timing the market. It's about time in the market. One of my favourite sayings, Ren not having clear goals is a mistake that a lot of people get into. And, you know, you don't have to have a two page run down of your life story and why you're investing. You just need to have a few clear ideas on what you're trying to achieve. [00:36:16][21.0]

Alec: [00:36:16] Yeah, and people often wonder why goals are important. The simplest way to understand it is there's a lot of ways to make money in the market. There's a lot of timeframes in which you can make money. And like different assets, different investment strategies lend themselves to different like time frames and different goals. If you don't have the goal and you just like I want to make more money, you won't be able to like a clear strategy won't come from that. You know, having a goal sort of sets up the parameters about how you want to invest, what you want to invest in. So that's why it's important. [00:36:49][33.2]

Bryce: [00:36:50] Yeah. Another one paying too much in fees, adequate equity. It's our number one policy here is we hate fees, so try to avoid them as much as possible. The most obvious fee is brokerage and there are many ways in which you can pay too much brokerage overtrading or whatnot. But the key thing to remember here is that when you pay by a stock, you know you're going to pay brokerage. You actually need to make up that difference in in brokerage before you can start making money on the stock. So try to avoid paying too high a percentage in terms of brokerage. [00:37:25][35.6]

Alec: [00:37:26] This was a classic line from James in our Facebook group. So you know how CommSec do up to a thousand dollars, ten dollars a trade and then a thousand dollars and more 20 bucks a trade? Yeah, he I don't know if he misread it or just didn't think about it, but he made a trade for exactly a thousand and that's the first. So if he did nine hundred and ninety nine dollars, it's ten dollars brokerage but he did a thousand so it's 20 bucks. Just stuff like that is. It's it's easy money that you're giving, it's killer. [00:37:57][30.9]

Bryce: [00:37:57] It's another one, and this was a big one for us that we often talk about and that is reacting to media or listening to too much noise. [00:38:05][7.3]

Alec: [00:38:06] Yeah, look, we hate the day to day noise of the stock market. There are so many people in the market that have an incentive to get you to do things, to get you to click, download or read and obviously where in the media business, but also to get you to buy things like the whole stock market is orientated around activity. The ASX makes money. All the product issuers make money. The world is in the stock market. Well to set up to encourage activity. And it does encourage activity. And you've got to be really conscious about blocking out the noise. But this one isn't. This story from Simon. And our Facebook group isn't related to the stock market, per say, but I think it is a classic example of reacting to the media. He was watching a TV show called [00:38:54][48.5]

Bryce: [00:38:55] Gold Rush [00:38:55][0.4]

Alec: [00:38:57] and was motivated by that to go onto eBay, buy gold discovery tools, a prospecting licence, and then he headed off to compete to try and dig a gold nugget at the river. There, he picked a spot, realised that his fifty point fifty dollars worth of gear was no match for the riverbed. And after 15 minutes of skimming moss off the top of rocks, he gave up and drove the hour back hard. [00:39:28][31.2]

Bryce: [00:39:29] Unbelievable. [00:39:29][0.0]

Alec: [00:39:30] There you go. That's the power of TV in the media. [00:39:32][2.0]

Bryce: [00:39:33] Unbelievable. A couple of other mistakes chasing high dividend yield. That's a bit of jargon there. But that means buying a stock because you because it's going to pay a good dividend doesn't mean the company itself is any good. So just be aware that, [00:39:48][15.0]

Alec: [00:39:48] no, this is this is actually one that we say a lot. And, you know, you look at like a Yahoo! Stock's great or whatever, Google Finance, Yahoo! Finance, and it's like dividend yield is eight percent. And then you're like, oh, that dividend is incredible. I'm going to buy it, though those numbers are always based on the last year's dividend and they'll change. So like for share prices, falling dividends will likely also fall. So a lot of people in the Facebook group ask, you know, this stock share price has fallen, its dividend yield looks so good that alone shouldn't be a reason to buy the stock because the dividend yield is based on the last dividend paid. [00:40:28][40.3]

Bryce: [00:40:29] Yeah, trusting the wrong financial advisor or fund manager. So do your own research when it comes to choosing those people who are going to give you advice. [00:40:39][9.8]

Alec: [00:40:39] You're not locked into the first adviser. [00:40:41][1.7]

Bryce: [00:40:42] No, that's the key role there. [00:40:44][2.0]

Bryce: [00:40:44] And also knowing how your platform and product works, particularly when it comes to some of the sematic ETFs and leveraged ETFs that are out there, not everything is built and constructed the same way. So I always have a look under the hood at how products you're investing in work as well as platforms, because there's different fees, there's different ways to execute trades. So again, you're not locked into any platform. So you can have a bit of a a bit of a look around. [00:41:15][31.1]

Alec: [00:41:16] We are we made a mistake about this. One of the only apologies we've ever had to make on the Equity Mates journey is we were talking about a beta shares product and misunderstood how the leverage, internal leverage in the ETF worked. So, you know, you got to do your research. Stephen in our Facebook group similarly talked about how he was dabbling in bear ETFs without knowing how they actually work. Jared told us about his brother in law who didn't know you needed a cash account connected to a brokerage account and ended up in debt to Commonwealth Bank. So you just got to understand how some of those things work. [00:41:56][40.7]

Bryce: [00:41:58] So Ren plenty of mistakes there that I'm sure a lot of the community have made. We've made plenty of them ourselves. The good news is we've learnt from a lot of them and trying to pass on some of the lessons that we've made to the rest of the Get Started Investing feed community. But in the next episode is the more important part. We're going to be discussing some of the cognitive biases that underlie all of these mistakes and actually how you can start to recognise the mistakes that you're making and how to try and avoid them. So stick around for next episode. That's what we're going to be discussing. So that is the end of Get Started Investing feed if you're feeling ready to dip your toe into the Equity Mates feet. However, we suggest that the ASX Week episodes in our main feed from last week might be the perfect place to start for you. They're all inspired by the best con. From the ASX Investor Day that we went to a couple of weeks ago, you may have seen it on Instagram and these are sessions that were designed specifically for the regular retail investor. So a lot of great information in there that cover a wide variety of topics. Have a listen. You'll see it in your feed ASX Investor Week. There should be about five episodes. And remember, you can always tell us what you are thinking. And we love to hear your feedback. Email us at Contact@equitymates.com. But Ren, as always, great to chat stocks. Pick it up next week [00:43:24][86.3]

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