As a blogger -slash- human, I have the tendency to portray myself in a better light than I really am. Please know, I am a very faulty person. I too make mistakes, a lot! So without further ado, here is one of my biggest investing mistake.
Emotions = Bad
Emotions are a good thing, don’t get me wrong, but they have no place in investing. For example: having a feeling, that a stock, against all odds, might be the next best thing, is not a good investment strategy! Getting an inkling, that it is time to sell – is not a good exit strategy.
That is why one of the biggest mistake anybody can make when investing is to get carried away with emotions. Fear and excitement are both very dangerous.
On the one hand fear can paralyze us to keep us from investing when the market is down (just as we have witnessed in the last couple weeks).
On the other hand excitement can give way to greed, which can blind us to the reality of things and keep us from making rational decisions.
I have not been investing long enough, to witness many downward corrections like the Corona-scare of 2020, but I have seen (and felt) the effects of greed and excitement.
Bought Low – Sold Lower
Now everyone knows the number one rule of investing: buy low, sell high. I somehow managed to buy low and sell lower:
In 2016 I invested into Deutsche Bank after the stock price plunged from 24 EUR at the beginning of the year to 12 EUR in October 2016. My naïve emotional self thought: “Great, I’ll buy! Surely an institution like DB with thousands of employees will turnaround. As soon as the stock goes up a couple of bucks, I’ll sell and take the profit!”
Over the next couple weeks and months I watched the stock go up to 20 EUR by the end of 2016! I got excited at the thought of almost doubling my money in a few months, but rather then selling and taking a nice 80% profit, I got greedy.
I didn’t sell in 2016 when DB was trading around 20 EUR or in 2017, when the stock was still above my entry price. But rather, I cut my losses in September 2018 at a painful -17% loss!
Moral of the Story
The DB debacle has taught me that market timing really does not work (at least not for me). It also compelled me to move away from investing into individual stock and look into investing into index ETF’s …
Sidenote: DB trades at around 7 EUR today.
Give me some feedback
What was your biggest investment mistake? Please let me know in the comments or send me a message directly.