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  • 5 Investing Mistakes I Wish I knew at 20

  • In May 2021, Dogecoin's price crossed 70 cents and reached a valuation of 93 billion dollars.

  • But that didn't last long.

  • In the next few months, its valuation dropped to just 27 billion dollars at the time of

  • this video.

  • 66 billion dollars of wealth was wiped out.

  • The reason why Dogecoin kept rising first to 50 billion dollars, then to 70 and eventually

  • to over 90 Billion dollars is because on the other side of the equation, there were people

  • who paid that much money to buy Dogecoin, at the end of the day, what drives the price

  • of any asset is demand and supply.

  • Enthusiasts believe that Dogecoin will still rise in value and it has a future.

  • Even if it doesn't, it's still not bad for a coin that started as a joke.

  • But that's normal in the world of investing.

  • You never know for sure what will rise and what won't.

  • So we all make mistakes, even the world's greatest investors.

  • In 1993, Buffett bought a shoe company called Dexter Shoes.

  • Buffett's investment in Dexter Shoes turned into a disaster because he saw a durable competitive

  • advantage in Dexter that quickly disappeared.

  • Buffett claims that this investment was the worst he has ever made.

  • He lost $3.5 billion on that deal.

  • That's why here in this video, I want to share with you my 5 worst investing mistakes.

  • In fact, I see a lot of people repeating these mistakes even though they have been in the

  • stock market for some time already.

  • In my over 7 years of experience in the stock market, here are the 5 investing mistakes

  • you should avoid at all costs if you want to stop losing money and start making money.

  • But before we do that, here is a little disclaimer - this is not financial advice, and everything

  • that's said in this video is for educational and entertainment purposes.

  • And now, let's start with the first one.

  • 1.

  • Listening to the big guys when I got into the stock market for the first

  • time.

  • As a beginner, I started reading what the big guys are saying, such as JP Morgan, Citigroup,

  • or wall street in general.

  • I thought that since these guys have been in the market for such a long time, they certainly

  • know better than me.

  • They are professional investors.

  • They have thousands of analysts, economists working for them, so if they are saying that

  • this is a safe investment, then they are probably right.

  • But the truth is, you should never trust these guys because they are saying that because

  • it's in their interest, and it might not represent the reality.

  • In 2004, when the housing market was turning into a bubble, the dean of the Colombian business

  • school Glen Hubbard was paid to coauthor a paper with Willian C. Dudley, Goldman Sachs

  • Chief Economists, where they praised derivatives (derivative market - has improved the allocation

  • of capital and risk and were enhancing financial stability) when in reality it was clear that

  • derivatives were creating this bubble that sooner or later will burst.

  • Even Warren Buffett warned everyone that derivatives are financial weapons of mass distractions.

  • We made an entire video about it explaining how it works.

  • The link will be in the description.

  • But that's just one out of many examples.

  • Others were paid to say that Iceland's economy is so stable that its housing market will

  • forever keep rising, but it was one of the first countries to go bankrupt during the

  • 2008 crash.

  • Many people based their investment decisions on what these economists and professionals

  • said.

  • Others went so far that the top 5 Lehman Brothers executives destroyed their company just to

  • fill their pockets.

  • They made over a billion dollars.

  • Do you think they care about you?

  • So when you want to invest.

  • You have to understand the market yourself, never rely on authority.

  • Never rely on what the professionals are saying.

  • Of course always read their opinions, but at the end of the day, make your decisions

  • based on your best understand of the market.

  • 2.

  • not understanding Debt

  • The stock market is already slightly complicated, but most people can figure out how it works

  • in a relatively short time.

  • But what most beginners don't understand is how much leverage is involved and how it can

  • impact a particular asset.

  • When you see the news such as traders use a 100 to 1 ratio when trading bitcoin.

  • Most beginners don't really pay much attention to such news, but if you don't understand

  • that, you should not even invest.

  • Even if you do your analysis, figure out that this asset is going to double or triple; leverage

  • can destroy everything.

  • The leverage ratio 100 to 1 means traders are borrowing 99K dollars for every 1K dollar

  • they put themselves.

  • Say I am a trader, and I have just 1k dollars.

  • If I make a 10 percent profit, that's 100 dollars, but if I borrow 99K, now I am trading

  • with 100K, and if I make a 10 percent profit, now that's 10K dollars and not just 100 dollars.

  • But as always, the more profits you can make, the riskier the asset.

  • But if the bitcoin price drops by 10 percent, which is quite normal for an unstable asset

  • such as crypto.

  • Your broker will immediately sell all of your position in order to minimize losses.

  • In fact, he will sell them at the lowest price possible to exit your position as soon as

  • possible because you have no money left to trade and if the broker won't be able to get

  • his 99K back, you will owe your broker the remaining amount plus interest.

  • But the question is, how is that going to impact you?

  • If a single trader goes bankrupt, that's not a big deal, but when leverage is widely used

  • in that market, then there will be an oversupply of that asset in the market even if the price

  • slightly drops.

  • When the supply outweighs the demand, that will further decrease the price which will

  • push more brokers to exist the positions of their clients.

  • Its like a snowball effect.

  • Suddenly an asset with a promising technology suddenly goes to zero.

  • But some of you might say: if it's a profitable asset, there will be some demand for it, or

  • there are a limited number of bitcoins in the market, so there will always be a demand,

  • unlike the fiat currency, there is a promising technology behind.

  • Which is true, but people said the same thing about the housing market.

  • And a house is the type of asset that you can touch, feel and use.

  • In fact there will always be a demand for shelter.

  • It's one of the oldest and most mature markets in history, and yet leverage destroyed it.

  • So before you invest in any asset, find out how much leverage is involved.

  • 3.

  • not seeing the big picture

  • When you throw your hard-earned money into the stock market, your heart starts beating

  • twice faster when you see the stock price drop.

  • The fact is - daily ups and downs do not matter at all.

  • They don't even represent how the business is performing on a daily basis.

  • A single rumor can dip the price or raise it.

  • That's how the market works, it moves based on people's perception about the company and

  • its potential future, but as a long-term investor, you should not care about that.

  • Take Tesla, for example, it had moments when the stock price dropped by 20, 30, or even

  • 50 percent, but if you take a look at the chart, the stock has increased by almost 18K

  • percent since it went public.

  • The people who saw the big picture understood Tesla's vision, and ignored these dips, and

  • kept holding their stocks.

  • Tesla is just one example.

  • There are millions of other examples.

  • Amazon has grown by 192K percent since it went public.

  • So, before you invest in any company, figure out its strategy and find out where it would

  • be in 5, 10, or 15 years and then invest.

  • 4.

  • Not investing in knowledge Most people overestimate themselves.

  • They watch a video or two on youtube or read a few blog posts on the internet and imagine

  • themeless investing experts explaining why Dogecoin is more valuable than the US dollar

  • and that people like Warren Buffett are losers since they haven't invested in Dogecoin yet.

  • A wise man once said: the more you learn the more you find out you don't know.

  • If everything was black and white, then everyone would have earned a fortune from the stock

  • market.

  • But the reality is, most retail investors lose, and even hedge funds who charge astronomical

  • fees trying to beat the market often don't.

  • In fact, Warren Buffett bet a million dollars that stashing money in an index fund would

  • make you richer than if you entrusted it with hedge fund managers who spend a fortune trying

  • to beat the market.

  • And guess what, he won the bet!

  • The information you consume on YouTube or the internet is usually made for entertainment

  • purposes because that's how you get the views.

  • It doesn't worth spending so much time and money creating a video when not enough people

  • watch it, so be careful what to trust and what don't.

  • Find credible people, people whom you trust and who seem experienced.

  • Don't hesitate to spend some money on professional courses.

  • Just a little disclaimer, I don't mean fake courses that will teach you to become a millionaire

  • in 67 steps but rather the ones that actually teach you how the market works, how to analyze

  • companies, how to read financial statements, and so on.

  • Remember, time is your most valuable resource, so don't hesitate to spend on education and

  • save yourself a lifetime.

  • 5.

  • Not having a clear plan

  • Everyone gets into the stock market for one reason - to make money!

  • That's the obvious reason, but what most people don't determine is what is their end goal,

  • what is their investing strategy.

  • For example, if you hold index fund stocks, then you should not even follow the stock

  • market.

  • Your goal is to build wealth over a long period.

  • But if your strategy is to pick the right company that will dominate a certain sector,

  • then you should take a completely different approach to invest and focus on entirely different

  • factors.

  • When you don't have that plan before jumping into investing, you tend to make all kinds

  • of mistakes.

  • You start reacting emotionally to ups and downs, and you make decisions that will damage

  • your portfolio overall.

  • That's why when you are starting, start with a small amount.

  • Don't put all of your money into any asset, even index funds.

  • Once you try a few stocks, you will have a sense of how everything works.

  • And start slowly building your strategy.

  • Otherwise, you will be distracted by all kinds of meme stocks that will drain your bank account,

  • and you won't gain much at the end of the day.

  • And now it's your turn to get your 2 free stock from Webull.

  • We bull is a broker that you need to buy stocks, but if you use the link in the description

  • you will get 2 free stocks when you deposit 100 bucks.

  • By the way, what is the worst investing mistake you have ever made.

  • Let me know in the comment section below.

  • If you have enjoyed this video, you will most definitely enjoy this custom playlist that

  • I have created specifically for you that has our most popular videos on .... that can potentially

  • change your life.

  • And now give this video the thumbs up that it deserves, and make sure to subscribe if

  • you haven't done that yet.

  • Thanks for watching and until next.

5 Investing Mistakes I Wish I knew at 20

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5 Investing Mistakes I Wish I Avoided When I Started

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    Summer posted on 2021/08/13
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