To The Moon

24 Apr Newbie's Sharing on a Good and Timeless Book.

I have shared this story but I omitted the most important lesson. As such, I've re-written to article. 

In addition to this, I've changed the structure and I hope I'll be able to share this with more people. It's about a book which I only understood later and sent me on a learning journey and with it, 3 lessons in investing. It's about the life of Jesse Livermore, one of the greatest and most daring traders ever. For those who have read the three lessons I have shared, scroll down to after the last lesson. I thought it was the most important lesson.

5 years ago, I came across this book my dad had which was lying about. At that time, I had an interest in reading biographies because it offered a personal glimpse of people's lives. When I first started reading this book, although I didn't understand a lot of it, it captured my interest because it was about a boy who constantly challenged himself and "put his money where his mouth was". In fact, he felt he could only learn whether he was right if he "put up the money". I remember reading it intently because he was the underdog who would constantly pit himself against the crowd (the market). It seemed like a nice story although... I didn't understand a lot of his thoughts or what he was saying.

Zipping back to now, when I started investing, memories of that story came back. Phrases which I didn't understand then, made total sense. These are the lessons which I have learnt from the book (and am still learning):

Chapter 3 (Do your own research and have your own convictions): "A man must believe in himself and his judgment if he expects to make a living at this game. That is why I don't believe in tips. If I buy stocks on Smith's tip I must sell those same stocks on Smith's tip."

When I first started out, all the stocks looked like shiney jewels. This was because I was awed that I could now own a portion (albeit a small one) of the big names. Tesla, Apple, Google, oh boy, I've read about them! When I tried buying them, the price fell! I didn't understand ( I supposed that's where the phrase "I thought stonks only go up!"

This taught me that you must have your own conviction by doing your own research when investing. If you believe and rely on tips/articles, buying on them would mean you have to sell on them. This is why I take shared opinions with a pinch of salt. I have seen stocks rise when everyone else is proclaiming that recession is neigh and "drought" is upon us. I have seen stocks crash when everyone is saying "it's the next big thing". No one can be consistently right.

Chapter 5 (In the the long run, good stocks have a high probably of always going up): "Well, it is a bull market you know." There was a customer who kept saying it was a bull market when tipsters begged him for tips. He also would not sell when others told him it was time to sell, because he claimed that he would "lose his position".

For me, I didn't understand this until you see the general trend of stocks. It was important to identify value stocks and more importantly, not to focus on the fluctuations. To be honest, this is hard. Looking at for example, the famous case of the S&P 500, it's been growing all these years despite the recessions and wars. Having a stake in a good stock is important, but what is more important is learning to hold it. The big money is not in the daily fluctuations, but in the long run. "After all, it's a bull market, you know".

This was when I started learning to hold, instead of doing a daily buy and sell. This was also the point where I understood the difference between a trade and an investor. Additionally, in relation to the previous lesson, I started to understand that it is impossible to consistently be right and one should not time the market.

Chapter 10 (Learn and Earn from your Losses): "The recognition of our own mistakes should not benefit us any more than the study of our successes. But there is a natural tendency in all men to avoid punishment. "

For me, these 3 lessons were hard because I lost money (maybe that's why I remember them so well). When I lost quite a bit on my first stock, I wanted to give up. When I tried again, I lost again and I wanted to give up. Both times, I remembered seeing the stock rally and the moment I bought them, bam! Losses! I stopped for a while but was adamant to say the money "was lost" (maybe pride...? I don't know). That's where I realised that the author was able to overcome his losses but treating them as lessons. Having that perspective, I am learning (no I haven't completely mastered it, heck I'm only at the tip!) to take the losses as "tuition fees". It made me feel better, but more importantly, I begin to look back at where I went wrong.

I'll be honest, I haven't made a profit yet (it's been 3 months and I'm still a newbie) but when it does, I'll let you know that the author was right. After all, he did say that "nothing changes in Wall Street. What happens today (back then) will happen again."

Not in the Book (but the most important lesson): Feelings run high during investing and this no surprise as it involves a lot of money which can change lives. Although Jesse Livermore made a lot of money, he was very depressed at the end of his life and he ended it. I just want to say that no matter how much we earn and loss, we must never let money rule of lives. While I don't profess to know why Jesse ended his lives, I just want to say that the most important investment is our life.

Oh yes, the title of the book?

REMINISCENCES OF A STOCK OPERATOR (A story which mirrored Jesse Livermore). I hope you enjoyed the 4 lessons I learnt.