- 20 Key lessons I learned in my first year of trading for investors both new and old.
- My best and worsts stocks of 2018 and recommended trading platforms for beginners.
- Top stock quick picks for 2019.
20 Things I Learned In My First Year Of Investing
Looking back after over a year of trading, I have truly learned a lot. I have marveled at stocks since I was a kid investing in BIOFUEL at age 8 with my dad, in just the third grade. Since then I have been in awe at the amount of ways you can invest your money to get higher returns than the minute interest rates you find in your average bank savings account. Over the past year I have learned copious lessons from books, TV, videos, and my own trading experience, and want to share these tips with you, so that you can hone the skills I have spent hours developing in as short of a time as possible to maximize profits. So here they are, my top 20 lessons I have learned in my first 1+ years of trading on my own, in no particular order:
1.) Only Trade Companies You Actually Know
Early on it is easy to be hypnotized by penny stocks that could be potentially double or even triple overnight, but it is best to stick with the companies that are well known and established. You will have far more luck with best of the breed stocks rather than shooting for stocks of companies that you do not even really know if they exist.
2.) It Is Alright To Be Aggressive When You Are Young, But Not Stupid
Aggressive trading is good when you are young because even if you lose it all you have your whole life to make it back. That does not mean it is smart to buy calls and puts that have almost no chance of profit. Measure risk and reward with every move you make at any age.
3.) Only Trade Options When You Strongly Can Back Up Your Thesis
Options can really up the ante, and make you rich if you are right, but you can also much easier lose it all. Only trade options when you know a stop should be priced much higher or lower than it currently is, and try to choose an expiration date as far out as you can afford because you will learn timing is key in trading options.
4.) Following the Crowd Is Usually A Wise Way To Go
Stocks mainly move on volume and news, such as earnings, so it is not unwise to follow the crowd in many situations. Someone out there probably knows something you do not know, so use that to your benefit by listening to others thoughts and opinions.
5.) Research, Research, Research
As Jim Cramer always says, “It’s buy and homework, not buy and hold.” You have to do your research on every stock you own and continue to stay up to date on all the news and happenings having to do with your homework. This is one of the most obvious, yet most important practices of trading and investing.
6.) There Are A Lot Of Unreliable Sources Out There
Message boards are filled with people trying to get a stock to move the way they want it. Make sure you are doing your research with a reliable source so it does not all go to waste. It is natural to be inclined to believing sources you hope for, even if they are not necessarily true.
7.) Dividends Can Act As A Safety Barrier
Dividends allow you to make gains even if a stock is not performing as expected. A high dividend yield allows for a safer investment and a reason to hold on for the long run quarter over quarter. A high dividend should not be the only reason you invest in a stock as underperforming stocks may cut dividends as GE recently did.
8.) Know The Current Market
Markets can change fast, and a stock that was a good buy a month ago may not thrive in the current market as it once did. Know what type of market you are trading in. Technology growth stocks have thrived in the current market, but a switch over to a bear market could mean you may want to switch to low risk high dividend providers. Pay attention to news of the broader market as well as the news of your particular stock. The Volatility Index (^VIX) can give you a scope on how you should feel about your current trades.
9.) Diversify Your Portfolio
A diverse portfolio protects you from the collapse of a certain sector. Invest in multiple different types of companies to make sure you do not get hit hard in a sectors collapse or miss out on a rally in one type of stock.
10.) ETFs Are Your Friend
ETFs are a great investment for both young and older investors. They are also a great pick if you want to go long on a certain sector. Learn how to use them to your advantage and they can be a powerful tool. They can also be helpful if you do not want to do as much homework, as someone else pretty much does it for you.
11.) Buy Value And Growth
It is extremely beneficial to buy stocks that are currently at a good price and have great potential for future growth, to maximize profits. Use PE ratios (Price to Earnings) to compare stocks to their competitors to help find value and potential growth.
12.) Do Not Go All In On One Play…Ever
Once again, stay diversified. You do not want to risk losing it all even if you feel you know something big. Cover calls and puts with spreads, and keep some funds stashed away in other areas.
13.) Average Down Prices and Always Use Limits
Try to space out your buys when you find a stock you like to allow yourself to average down the price, so you can get as close to a stock’s bottom before you have acquired the desired amount of shares. This allows not only for maximum gains, but also minimum losses. Also, use limits both when buying and selling to get a stock at exactly the price you desire.
14.) The Past Means Very Little, Only What Will Happen Next Really Matters
Basing your stock picks solely off of how a stock has performed in the past will get you little results. Look at the valuation of the stock and use that to formulate what you think it will do next. Use past charts and patterns only as an additional tool to enforce technical data and help strengthen your investment idea.
15.) Have Patience, Timing Is Everything
One of the hardest parts of trading stocks is not always finding a good stock, but finding a great stock at the right price. It is like shopping at a store. You can easily find a great product, but what is key is finding a great product on sale or at a price you can afford. With options trading timing becomes even more key with expiration dates. Even Wall Street analysts struggle with timing when setting price targets, so learn to have patience and trust in your research before selling.
16.) Trust Yourself, If You Really Know A Stock Is Going To Go Up, Stick With It, Just Do Not Become Too Attached
Too many times I would wonder why a stock I had so much good information and research on was not going up, only to sell just before it finally made its move up. Trust your research. If you have a good thesis stick with it, unless bad news begins to come forth.
17.) Only Buy The Best – Be Aware of Competitors
Owning a stock that is just going to get beat up by a more powerful competitor is not a smart approach. Buy the best of the breed stocks for the best possible results. A weaker company is almost always going to be driven down or bought out by its alpha competitor.
18.) Keep Emotions Out Of The Market
Never become too attached to a company. Keep emotions in check when market volatility increases. Do not be drawn to sell low and buy high because you become overly anxious. Always have a plan and stick to it.
19.) Do Not Short/Put Good Companies Unless You Know Something Is Wrong
Do not be drawn into buying puts or shorting good companies just because you think a stock is overvalued. The next earnings could show growth and the stock may turn out to actually be undervalued. Save puts for failing companies not the best of the breeds.
20.) Listen To Others Opinions
It can be very helpful to hear others take on a stock before buying. If you cannot explain why a stock is a good buy to another person it probably is not a as positive as it may seem. Talk to others about your company you are interested in and listen to what they have to say.
My Best And Worst Stocks Of 2018
+17% profit in my portfolio in less than 4 months
Comcast has had a great turn around this year, and they continue to make deals that should create growth for years to come. With their recent acquisition of SKY, Comcast is create new pathways to profits, and their run could very well continue.
Berkshire Hathaway (BRK/B)
+12% profit in less than 3 months in my portfolio
Berkshire Hathaway has performed above the S&P 500 almost every year since its creation led by Warren Buffett. You can almost never go wrong with this trade as long as you get in and out at the right price.
+10% profit in less than 3 months
+11% profit in less than 4 months
Microsoft had a good year once again in 2018. This tech stock has become a reliable must-have investment as they continue to payout a nice dividend along with fast growth.
+15% in less than 2 months
Sony has traded with a lot of volatility this year. It has been on an upward trend for some time now, and has potential for even more big gains into 2019.
+13% profit in less than a month in my portfolio
Lululemon has become one of the most desired brands among adolescents, and is expanding across the country and into different demographics, which has resulted in incredible growth.
-14% decline in over 7 months in my portfolio
Ford had a rather rough year due to tariffs and a large slow down in the purchase of smaller vehicles. Earnings declined drastically in 2018, and even when it seems like the stock could not possibly go lower, it does. Ford will need to make a big turnaround in 2019 to keep investors interested.
+3% profit in over 7 months
In a case of bad timing, I got into Starbucks just a little too early. Dipping after earnings over the summer Starbucks has now made a huge comeback and recently delivered stellar earnings pointing towards blockbuster growth in China.
Fuelcell Energy (FCEL)
0% Even in over 9 months
Fuelcell Energy has potential to grow although it has been outperformed by it’s competitors Plug Power Inc. (PLUG) and Ballard Power Systems (BLDP). Fuel cells may be the future of clean energy, but this company is not the best in the business and it has showed this year.
-12% in over 6 months
Biotech stocks have, for the most part, struggled this year, though AbbVie continues to grow it’s dividend and looks to be trading at a fair price right now. I would not be surprised to see this take off sometime in the fairly near future.
-59% decline in over 4 months
It looked like Neovasc could be something special with positive results and a dirt cheap price, but all it gave me was losses as I became too attached to this penny stock in 2018. NVCN would go on to reverse split in September.
Dextera Surgical (DXTR)
-61% decline in over 3 months
Dextera was one of my first investments in a penny stock. Hoping for the stock to skyrocket from prices below 10 cents and create exponentials gains, I was instead disappointed when the company went on to declare bankruptcy and fall to basically nothing.
2018 Overall Performance Through Different Platforms
In my first year of trading I tried out numerous different trading platforms. I found all the big companies charge huge fews that take out chunks of profits. My top three recommended trading platforms with minimal fees can be found below along with my performance through these platforms. You can sign up through these platforms and many give you a reward just for trying them out.
Fee Free Trading + Options & Crypto Trading
$0.99 trading fee; Option to reinvest dividends and trade fractional share amounts
Unique round up investing option; Unique found money investing
Quick Picks For 2019
My top stocks for the upcoming new year
Ford looks to be setting up for an outstanding 2019. With a rough couple quarters behind them Ford has begun to develop competitive Electric and Hybrid vehicles, even foreshadowing a possible EV mustang in their most recent commercial. PE has now fallen below 6, so there is room to run for Ford. CEO James Hackett will look to turn around the company, and with a 6.28% dividend yield, it pays to wait.
Marathon Petroleum Corporation (MPC)
Marathon Petroleum has fallen drastically in the last month. Price Targets remain in the 92-125 range even though it has now dipped below $70. With a 2.7% dividend yield this stock has to bounce back at some point as it is now the largest oil refinery in America with its recent acquisitions.
Apple has been a must own stock for nearly a decade now. With pullbacks in recent earnings and expected stock buybacks it is the perfect opportunity to get in on this giant or even add to your shares. They too have begun to construct an enticing dividend.
AliBaba is known as the Amazon of China. They continue to buy stake in smaller companies and diversify their holdings. With all the talks of tariffs and the trade war on China BABA has fallen to an unbelievably low price. With their current expected growth they could easily go well beyond the $200 mark in the next year.
Alternative Harvest ETF (MJ)
If you want to bet on Cannabis look into MJ, an ETF that covers all the hottest pot stocks from Canopy Growth Corporation (OTC:CGC) to Tilray(TLRY). It offers a safer bet on one of the largest areas of growth the market currently offers.
Nike is an innovator and leader in athletic wear. They continue to make moves to grow their business, and have added a nice dividend to their already expansive portfolio. They have a premier marketing department that helps them keep up incredible numbers quarter after quarter.
Micron Technology (MU)
Micron Technology has an extremely low PE. One of the best value stocks in the market right now, Micron would be worth well over $100 if it grew to a similar PE ratio as its semiconductor peers. Look for a revaluation in 2019 that creates substantial profits for investors in Micron Tech.
Disclosure: I am/we are long F, AAPL, MU, MPC.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.