5 Things I Learned About Investing In 2017

2017 was a great year for me. As you can read from my latest dividend income report, my YTY dividend Income grew by about 230%. While that´s nothing more than awesome, I got some valuable lessons this year that I wanted to share with you guys.

Lesson 1

Buying a so-called “starter position” or “watch post” doesn´t work for me. I´ve done it several times before, and the only thing that can happen is the following:

  • The stock goes up, I think it´s more expensive, and I don´t add. It moves upwards even more, and I still don´t add, and after a year I have 70% gain. But, the amount is so small, so my gain is only around $100 to $200. That sucks when you were able to hit the bottom (I´ve done this with more than 10 stocks this year…).
  • Or the stock drops, but this doesn´t do me any good or bad. Since the amount is so small, I neglect this and focus on the fundamentals. While this is much better than the point above, it just makes me feel “the amount is so small, so I don´t really care”.

Overall, doing starter positions isn´t something for me. I know many investors use 30% 30% 40% buying strategy, but I think I´ll rather just buy the stock when I think it´s fairly priced, and just add more in the future when the price is fair again. Easy and simple.

Lesson 2

Losing money does not make me feel ill or sad. When my portfolio was down 30%, I said “fuck this” and I went to the gym. Then I´m done with my small mental outbreak. Easy and simple. Some story: So, I´ve owned a norwegian software company called Opera for many years (more than 5 years). I bought it at 80 NOK and it went from 120 NOK to 22 NOK.

Why? Several reasons, but currency problems was one thing, late delivery was another. In each report, they said stuff like “We experienced slow growth bla bla bla in this sector, but maintain high conviction that this will get better in 20XX”. Bullshit.

Overall, I held the stock way too long, and now the company isn´t one company anymore, but 4 companies in different segments. I lost more than $6000 on this stock, but I´m very thankful for that. It has made me the investor I am today, and given me a different mentality. Thanks Opera!

Lesson 3

Stock prices are a function of earnings and revenue and one should never look at the % when trying to get a grasp of the business. As you can read in my Introduction to Accounting, share price goes up when the company does better. So why on earth would you use the argument that it´s time to sell now because of the simple reason that the company you own makes more money?! Does not make sence at all. Okey, a few times fundamentals shows that the stock is overvalued, but again, most of the time, never focus on the % gain. Never. It´s noise and doesn´t give you anything.

Another point that I want to make, which you can read more about in this post, is that I don´t like growth companies were the fundamentals are ignored. Say NVIDIA and Amazon. I bought Activision Blizzard at around $36 and sold at $53. Once the P/E was around 42 I could not hold it anymore. It was just to expensive. However, how can one say how much Amazon should be worth? I don´t know, so I´ve choosen to stay away from such companies, let the tech funds take care of those posts, and just focus on boring companies.

Lesson 4

Tracking your dividend income and transactions (both buy and sells) is a wonderful way to focus on the long-term perspective of our strategy.

Lesson 5

To find the best stocks in the world, most of the time, you just need to look at the products you use. Go look at the toothpaste, pizza, yoghurt, computer, wi-fi, bed… You will see that companies like Orkla, J&J, P&G and more of what most dividend investor calls “timely holdings” dominate your product-basket. That´s where you start to look for great companies. Once that is done, just buy regularly when things look fairly priced (I´ll write how I do that in 2018) and you are set to go. It´s pretty easy actually. Just make it simple.

What´s your top 5 learning list for 2017? Anything that changed your investment style? Please share so that we can all learn from each others mistakes. 

24 comments

  1. Self knowledge is the key to success in almost everything we strive for in this life. It is obvious from your comments about yourself that you are comfortable in your own skin and understand how and why you react to events in your life. That may make you a fortune in investing gains, or not, but it will no doubt make you very successful. Very good learnings Mr. Stockles!

    1. Hi Steveark,

      Wow. Very kind words. Appreciate that highly, and I´m very glad that you focus on selv knowlegde. I sometimes find it hard to be humble, to openly publish my mistakes, because we live in a society where mistakes are frown upon. Ironically, admiting that you failed and trying to analyze what went wrong is the only way to increase your chances of not doing the same mistake again. The stock market is a strange place, because people know that they aren´t doing the “right thing”, and when it fails, they agree it was stupid, but after some time, they do the same thing again thinking that this time it´ll be different. As you say, Self Knowledge is the key. Thanks for commenting!

      I want to quote Bill Gates:
      “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”

  2. Mr. Stockles, Over the years as a DGI, I have learned not to chase high yields. I would rather have a secure 2-3% yield that will grow over time than a 6+% yield that I can’t rely on for the long term. More often than not the yield is high for a reason, higher risk. Tom
    Tom @ Dividends Diversify recently posted…Do You Travel Abroad?My Profile

    1. Hi Tom,

      Could not agree more. It´s so easy to think that 7% beats 2%, and that even though 2% grows faster, you get 7% right now, and that must be better, right? However, if people only knew what a dividend really was, they would understand that having a high dividend isn´t something to strive for, unless the company is super secure and don´t have any room meaningful to grow. Thanks for commenting Tom!

  3. ‘Allo Mr. Stockles

    Great quickie post – once again I am inspired as a newbie. Your blog has led me in the DGI direction on my journey towards financial freedom.
    I am now a avid reader of Sure Dividend, simplysafe and the diplomats – as well as your blog. Great inspiration- and a lot more fun to invest when I know what to look for.

    Keep it up in 2018.

    Happy New Year
    DividendNose

    1. Hi DividendNose,

      Very glad to hear that buddy! While DGI might not be right for everyone, it has a few factors that we all should strive for: A) When buying a stock you buy parts of a business, B) Frequent buy and sell kills the return, C) Buying companies that actually make money is so much better than buying those that “can” make money if everything goes right /binary bets are off.

      Well, that was just a few. About SureDividends, just remember that he wants you to take action quite often. I don´t really like that, but it´s much better than reading the news.

      Happy new year DividendNose!

      1. Hi, Stockles

        THX for the comment.

        I agree about SureDividends – I use to learn about American companies and be inspired. I miss they consider the key risks and take a longer view into the future. I like the analysis of SimplySafeDivend a bit more.

        /DividendNose

  4. Hi Stockles,

    Good lessons.

    Regarding lesson #1, for me I like using starter position or what I call a seed position. Then I wait and buy some more up or even down. On the downside I limit my buy size to no more than 2% of my total portfolio cost basis. On the upside, I continue to buy on forward momentum till it reaches a certain threshold where I would either promote it to be a core or call it a full position and leave as-is or I may sell it to make a nice profit.

    This strategy has done wonders for my portfolio. I end up with big or in some cases huge position sizes in stocks that have been big winners such as BA, CMI, ABBV. Also, when I see stock as a winner, that continues to beat and raise earnings estimates, I continue to buy it regardless of current valuation. The only time I would stop buying such a stock is when total position reaches 10% of my portfolio and/or if the current yield dips below 2%.

    Lesson #4: I agree tracking buy and sale transactions is a wonderful way to fine tune your investment decisions. I use a spreadsheet to track all my transactions (buy and sale) and even graph it to see how far I’ve come on a certain transaction, it helps me see the mountains and the valleys where I bought and sold a certain stock and gives me hints or clues to where the next transaction should fall. It’s an iterative process that gets better over time.

    Have a Happy New Year and with you a great 2018.
    Mr. ATM recently posted…Beware Of Risks In Utilities – PG&E Suspends Its DividendMy Profile

    1. Hi Mr. ATM,

      Wow. You certainly got your orders in line buddy. Would love to see a detailed post about that, because what are saying is so important, but yet so difficult to actually do in a wise manner. And there arn´t many people in our community wiser that you my friend.

      A Happy New Year for you to ATM. Looking forward to talking muuuch more with you in 2018!

    1. Hi Lanny!

      Glad to hear that. You know that the Dividend Diplomats was the first dividend blog I read, right? Great inspiration. Btw, flying to New York pretty soon, you don´t happen to live there by any chance? Would love to meet you guys.

      Stockles

  5. I partially agree with your #1. Timing is never going to work. However, when you mentioned finding the best priced stock … Its a hard question to answer. Looking at past performance never guarantees future performance. Rest I totally agree.

    I typically hold ETFs corresponding to the entire stock market. I have additional ETFs which track dividend achievers. Agreed I don’t look at value … but like you said I sleep better 🙂
    dividendgeek recently posted…2017 in Retrospect (Goals Review) & 2018 GoalsMy Profile

    1. Hi Dididendgeek,

      Oh, I agree with you 100%. Timing is never going to work, that´s why I buy when a stock is fair priced, and not only when there is a 50% upside. I buy when the price is okey, then add more in the future. In that way, I don´t have to wait 100 years before I find the bottom (which I will fail at anyhow). Did that make it clearer?

      Holding ETFs is probably a better way than what I do, but I think this is fun, and I also like to use the knowledge I learned in school, so while I might get a lower return, it´s worth it.
      Thanks for commenting.

  6. Some good lessons Stockles. I actually use the Opera browser and think it’s great…don’t know anything about the company but in line with Lesson 5 I might investigate 😛

    Lesson 1 is an excellent one to find your rhythm in. I am happy to add if a stock increases in price but only if I think future value will be higher. If the price declines, I usually add if the fundamentals can be confirmed – though there are some very good investors who say never add to a falling stock. Part of me sees the merit in that.

    1. Hi Wealthfromthirty!

      Really?! Cool. Haven´t heard many people who used it. I don´t like Opera anymore and will never own a stock, but feel free to check them out. Just try to understand what they really are now, I couldn´t make sence of it anymore.

      Yeah, I agree. However, I just get to greedy for some reason and stop adding. I suppose I have a devil on my shoulder telling my “the upside is already taken”. How to work more on that in the future!

      Thanks for commeting!

  7. Hi there Stockles.

    Been following you on Shareville and here and I enjoy reading your post. Learned a lot, but still a bit confused. My overall strategy is to buy stocks in companies that i use and like but I know I am kind of overexposed to the financial markets. The good is that all the money i put into the market is money I dont need, so down the line I will be able to pay off the house mortgage probably sooner but surely not later 🙂

    1. Hey Captmolo,

      Oh, very cool! Glad to hear that you have learned something from this blog. That´s the whole point behind Stockles.

      I see, feel free to contact me even more if you want to discuss this topic.

      Happy new year!

    1. Hi Steve,

      Thanks! Hard, but valuable lessons. Yeah, lesson 1 is very hard and it´s difficult to find a “perfect” way to cope with the problem. I just buy a normal position, it´s easier. Thanks for commenting and Happy New Year!

    1. Hi DividendPortfolio,

      Glad you liked it buddy. I know, right! It´s so powerful, but yet so easy. Tracking the dividend income really changed me as a dividend investor. Good luck in 2018!

  8. Very good read! Investing for the long run is a continuous learning process, so it‘s great to share experiences. 2017 in particular showed me the importance of investing regularly, no matter if we are in a bull-or bear market. „Waiting“ for a market correction would have been a mistake. But of course I prefer stocks of great companies, when prices are down .
    Cheers

    1. Hi Financial Shaper,

      Glad to hear that! And you are so right. We learn as we go. I find the battle between being a patient investor and a “don´t know, don´t care” investor hard. On one side, it´s smart to have capital and be passive, wait for better times. On the other hand, it´s smart to just buy regularly and don´t look so much at valuation and so on. Man, this game!

      Thanks for commenting

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