I have pretty good university credentials. Apart from my law degree, I did three years of Economics at the University of NSW. Absorbing information wasn’t new to me but understanding how to build a business in the real world, or grow wealth by buying and selling shares, well, that was a whole new ball game.
To be completely honest here, even if it sounds like I’m promoting something I have ownership in, a few years back I started really getting involved with editing the Switzer Report – an investment newsletter. It took me a while to break into it but one day, something just changed. I found myself addicted.
Every Monday, Thursday and Saturday I’d edit the Switzer Report but it was no effort — I was hooked. I’d get into the office so early and almost digest the entire Australian Financial Review and The Australian Business section while eating my breakfast.
But I had to do something to channel this energy and knowledge. I didn’t want to ‘experiment’ within my self managed super fund (SMSF — more about that on Tilly Money as time passes) So I set up three online accounts and got to work learning as much as I could.
I chose to go with CommSec as I use CommBank’s NetBank service, so it was easy to link our accounts to pay for shares when I bought them, or for the proceeds from a sale to go into that account.
I was all set up but a little shy still about knowing what to buy. And then along came COVID-19. I had some spare cash and could see opportunities. So I bought quite a few shares — and even sold one or two that were impulse buys. Warren Buffett says over and over again: buy quality companies and hold them for a lifetime. So that’s what I’m doing.
Before I buy any shares, I research the company as much as I can. I’ve even read the company’s annual report and meeting minutes to find out what’s in the pipeline, and anything that could affect its share price.
We’re in this COVID-19 market still where no one is quite sure what direction we’re heading so there’s so much volatility still. Largely I’m buying blue chip quality stocks that fall into the ASX 200, I use this strategy as I’m relatively new to buying shares without the advice of a real live stockbroker, and blue-chip stocks tend to be more stable, are less volatile (except during such Black Swan events like this pandemic) and they usually pay dividends. Generally, I tick the box that says I want to reinvestment these dividends. This means I don’t take my dividends and spend them, I reinvest them and get more shares.
Warren Buffett is my role model for many reasons. Buffett has the runs on the board and when he talks, there’s gravitas there. He’s not flamboyant; he doesn’t show off his wealth; and he always sounds so measured.
I’m not investing my cash stack all in one company but spreading it across a few companies from different industries so I don’t have all my eggs in just one basket. The biggest risk in share trading is there’s the possibility you could lose some or all of your investment if the company’s share price falls dramatically or if the company goes into liquidation. I bought a few shares purely because I saw them so beaten up by COVID-19. I bought Flight Centre and Webjet and even Corporate Travel Management because I believe they’ll bounce back. I’m taking a real risk here but it’s a calculated one. But as Warren says, invest for the long term.
I’m aware that if any company went bust, as a shareholder I’d be last in line to get my money back. I’m prepared to take this risk, but only with a few stocks like these ones because the reason they’re cheap is 100% due to the coronavirus restrictions on travel..
Here are my main tips:
Read, learn, read more, learn more – and then take action
Investing in the stock market is not gambling. Learn, ask questions, seek help, experiment with small amounts, understand risk.
Don’t let your emotions rule.
Market fluctuations can be stressful for shareholders as they see their wealth rise and fall on a daily basis. This can also lead to poor decision-making where investors sell when share prices are low and buy when they’re high.
Learn to deal with unexpected events or Black Swans. They’re just a part of life and normality returns.
No one knows how future shocks can rock some companies – or even most companies as we’ve seen with Covid – the global pandemic. Even the most secure companies can be hit by world events like COVID-19, natural disasters like earthquakes, wars that never seem to go away or politics. As Warren Buffett says: “It’s going to have interruptions and you’re not going to be able to foresee these interruptions …”
Investing means spreading your risk
When you feel you’ve got enough money in the stock market, go and learn about other ways to make money. Invest in property, open a small business. Don’t put all your money into one wallet – spread your risk. It’s more interesting this way too.
Start to read good information
I love the Financial Review. I read it every day. And try the Switzer Report – I hang out for this! It’s what changed me!
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.