A warm welcome. I hope you had a good week.
Let's start this newsletter with the conclusion of the last email. I told you that I would respond to all of your replies...
Well, Substack (the platform I use to send the newsletter) had other plans. I didn't receive a single reply because of a technical problem from Substack ๐ง But after asking the team for the emails and waiting a few days, I finally received them today. I have already replied to everyone, at least to the messages I received. I just hope I received all of them! Let me know in case you wait for a reply!
The ones I received made me very happy. Many of you told me you were excited and that you liked the more personal touch ๐
So, thank you so much for your support! But now letโs get into it.
๐ Overview
Today I want to talk about zooming out. We'll start the email with a few headlines from this week but I will keep this part short. And then we'll talk about one of the most important concepts in investing. This one applies not only to investing - but to being successful no matter what you do.
Zooming out - the power of focusing on the long-term results and not being fazed by short-term setbacks. We jump back 7 years to the first time I thought the next fincial crisis is starting ๐ค Let's go!
๐ Story time
Today's topic, as I said anove, is "zooming out". What exactly do I mean by that when it comes to investing, and why is it so important? Let's find out!
We've all heard the saying: focus on long-term growth, ignore short-term price movements as an investor, don't fall into FUD or FOMO just because the markets drop a little. Yes, we hear these things, but until we experience them ourselves, they are just a theoretical concept we hear from others. But experiencing it is something else.
It was early January 2016, just before my birthday. A few days before, I had started studying the financial markets (at least I tried). Every day I read the news on finanzen.net, a financial news site. I was 17 at the time, and in a few days I would turn 18. I wanted to start investing right after my 18th birthday, so I prepared myself. I had saved a lot of money, and the plan was crystal clear: I invest the money, prices go up, I make more money. Simple!
Well, prices donโt only go up ๐
January hit me differently. Do you know what happened in January 2016?ย
No, probably not. And today it's not important to know either. But back then my chart looked like this:
Damn... I knew there were price corrections in the past, but now that I'm getting interested in the markets, it was something else!ย
I couldn't stop reading the news. I mean, why did this happen, is this the next financial crisis? And is it a good idea to start investing? What if I invest in a few weeks and then lose 30% of my money in just a few days? And why does that feel so strange? I was always happy when the markets went up a few percent, but now a double-digit correction. That was not part of my plan. Should I really start investing?
Well, that's how most new investors feel in the beginning. 100% emotions! Everything is new and interesting and we hope every day for a green day ๐
But the reality is different. We don't know what will happen, we can only try to predict the future. Predicting the next days is hard, predicting the next year is too (but a little easier!).
Because the market always strives for productivity. That's the beauty of capitalism. We want to get better, more productive, and solve more problems. And that causes the markets to go up in the long term.ย
Certainly not every stock, not every commodity, but the general market moves up. And that's what we need to pay attention to as investors.ย
A few weeks later, I started my investment journey, and fortunately, there wasn't a 2008-type financial crisis. It was just a small correction. If we zoom out, we can barely see it.
๐ Takeaways
Hoping for short term gains, looking for shortcuts to riches never works. We need to be patient. We need to be consistent. Success comes when you do the right things over time.ย
Sounds boring? ... good! That's the way it should be. Lazy people don't like boring things, they'd rather bet on the next crap coin or stock that could make them rich.
But don't just trust my words! Here is an interesting chart I found.
Probability of positive returns increases the longer you hold your investment
What you need to do as an investor, regardless of where you are on your investment journey:
Think about your long-term goal:
Does your goal still apply? Has anything changed?
You don't have a long-term goal? Maybe you should set some goals for yourself!
Do you have an overview of your assets?ย
Yes: Go through each position and ask yourself if it matches your long-term vision. If yes: Perfect, move on to the next step. If you hold short-term positions, make sure you have a valid reason for doing so and are aware of the risks.
No: Get an overview! If you don't know what you have, you can't adapt to change or make the most of everything you have.
Check to see if there are events in the near future that could impact your portfolio. Is there anything you can do about it?
Yes: React according to your risk tolerance. It's better to play it safe. Only take risks that you understand.
No: Well, then there is nothing you can do. Prices always rise and fall in the short term and that's fine. As long as you invest in things you understand, you have nothing to worry about.
If you follow these tips, you're already further along than 80% of young retail investors.
๐ซ Conclusio
That's it for today. I hope you learned something new! Like last time, reply to this email and let me know what you think. Hopefully Substack won't have any problems this time! This is not a boring one way conversation - you can talk to me ๐
I'm off to visit two friends now. A Ukrainian friend will be cooking borscht - a traditional dish. I'm looking forward to exchanging ideas with her. I did an interview with her a few weeks ago - I look forward to sharing it with you in the future.
Enjoy your weekend!ย
Stefan
Thank you. I agree, we must shift our thinking away from short-term gain toward long-term investment!
Great!
Thank you for sharing. I agree having a clear vision of where you are, knowing where you were and where you are heading are all critical components in the journey of investment.
I would like to learn from you about the system/layout that you use to maintain proper overview of your investments.
Do you use excel? Do you journal on investments?
This is an area that I know I need to improve in and would love to hear your thoughts.
Thank you Stefan.
Cheers!
- Sergio