10 investing lessons I wish I knew 20 years ago

Scared money don't make no money.

When I was about 18 or 19, I started to think about investing.

I had no clue how to go about it. All I knew was that the richest people in the world made their money in the stock market.

At that time, the talk was always about Warren Buffett, Bill Gates, and Carlos Slim. Those three were at the top for many years. And it was because they owned a lot of shares of public companies.

It’s just like now. If you look up the top 100 richest people in the world, you will find that 100% owns stocks. And 80% of the people have all that money because of the stock market.

It’s not a coincidence. The stock market is the greatest wealth builder in the world.

To get rich, you must own stocks. Real estate is becoming a worse investment by the year. I’m in the process of selling my rental properties because the after-tax returns just are not worth it.

Stocks are the way to go.

I honestly wish I knew this earlier. Along with these 10 things.

1. Stocks have underlying value

The stock market is just like the real estate market. When you buy a house, you own bricks. When you buy stocks, you own a little piece of a much larger business. There’s a logic behind stocks and real estate.

For real estate, the logic is that we only have one planet, and we can’t create more land.

When you own a property in a great area in a growing city, the demand will only increase. Especially as the population grows. More people, the same number of houses, higher prices. Simple, right?

Look at the stock market now. When a company grows, they make more money, which makes it more attractive to own.

As a company’s earnings rise, more people want a piece of the action and the stock price increases. That’s how capitalist society works. And as long as we have that, stock prices will increase in the long run.

2. Inflation is good for stocks

Every few years, people worry about inflation.

We actually did experience serious inflation in 2021 and 2022. But as always, inflation went back down again.

Right now, there’s a lot of fear about inflation, too. Prices of precious metals are going through the roof, so it’s likely that it will eventually impact the production of goods at some point.

Many companies that produce physical goods use silver and copper. Those prices have been going up.

But inflation is not all bad.

Consumers see the prices of things they often buy increase, and they get scared. They correctly conclude that their money is becoming worthless.

That’s true, unless you own a business or have ownership in a business.

Think about it.

The prices are going up because companies are raising their prices due to shortages and high demand. The consumer doesn’t earn more, but the companies do.

While it’s true that costs will also increase for companies, most can maintain their gross margins, so it doesn’t impact them. Stocks are a great way to hedge against inflation.

3. Beating the stock market is not the primary goal

Every stock trader wants only one thing: To beat the market. That’s how people measure themselves in this field.

But for a long-term investor who keeps investing more money, market returns are perfectly fine.

Sure, it might be 20% one year, and 3% the other, but at least it’s not 0% every single year when you don’t invest.

Achieving market returns over a decade is better than beating the market two out of ten years.

4. There are ALWAYS massive opportunities

If you hear news about stocks or assets that shot up triple digits in a short amount of time, and your hands are itching from greed, just sit back.

You’ve missed that train. Never trade something after it reaches the mainstream because it’s too late. The insiders got all the action.

If you’re really interested in riding a big trend, put in the work!

Become an active trader.

In the history of the markets, there have always been massive opportunities to generate big returns.

And even if you are a passive investor, it’s worth doing research into individual stocks. If you’re smart about it and never hold on to losers, you can really make good money if you have a winner.

It just takes work. If you’re willing to do that, you can achieve good returns.

Simply decide to catch the next opportunity early on, or you can always sit back, invest in an index fund, and enjoy your life.

Check back in with your account in ten years.

5. Trends are everything

The stock market can sometimes be like a drowning man you’re trying to bring back to shore. When the man panics, he will take you down.

It doesn’t matter how great the economy is doing, if there’s global panic, and the trend is downwards, everything will go down (including gold and bitcoin).

Understanding this will help you in two ways. First, you understand why good stocks are getting punished (it’s just the trend).

Second, you’ll keep investing on the way down because, at some point, the market goes up again.

6. No one really knows anything about the future

I really appreciate all the experts on TV, YouTube, social media, and newsletters who are trying to predict the future, but we always have to realize no one exactly knows what will happen in a few weeks, months, or years.

In my eyes, all these AI predictions about the next few years are foolish. Recent history has shown all of us that the world remains unpredictable.

Also, you can’t just extrapolate the capabilities of AI.

Everyone simply has an opinion. Even if you’re the most famous economist in the world or an investor with the highest returns, you still don’t know what will happen.

While it’s good to be informed, it’s bad to react based on what people think will happen. Otherwise, you’re not an investor, you’re a day trader.

Investing for the long term is not about reacting, it’s about sitting. You bet on growth and you wait.

7. Timing the stock market is foolish

It’s certainly possible to time the market. There are many stories of professional traders who’ve done it. You can read about them in Jack Schwager’s Market Wizards book series.

But for long-term investors, it makes no sense to time the market. Peter Lynch is famous for saying, “More people have lost money waiting for corrections and anticipating corrections than in the actual corrections.”

Imagine you want to buy a stock at 50, and you’ve heard on Reddit that the market is due for a correction. You wait and rub your hands. “When this thing drops to 40, I’m going all in.”

It goes to 70 over the next two months, and then, just like the geniuses predicted, the market corrects. But your stock drops to 60.

Congrats, you missed out on 20% returns!

Don’t time the market unless you know what you’re doing. The same is true for investing in the S&P500. It doesn’t make sense to wait for a correction.

8. Stocks always revert to the mean

In the short-term, stock prices behave irrationally. In the long term, they are surprisingly rational.

If you worry about high valuations, and you want to avoid investing, remind yourself that things will even out in time.

Keep investing and play the long game.

There are always winners, and there are also a lot of losers.

Just because stocks move up in the long run, it doesn’t mean all stocks will go up.

Some will collapse and never come back.

Keeping this in the back of your mind prevents you from losing big.

9. A big decline hurts more than winning

Let’s say you buy a stock at 100, and it drops 20% over the next month.

You actually should’ve cut your losses at 10%, but somehow you’re still in the game because you think the stock will come back.

And you’re right, the stock goes up 20% in a week.

You look at the price, and it says 96. “Wait, what? I was down 20%, and now I’m up 20%. Why am I not back at 100?”

That’s the deception of percentage declines and rises.

Losing hurts more—in your stomach, but also in the bottom line. If you avoid big losses, you avoid this predicament.

10. If you invest scared, you remain scared

Scared money is the money you absolutely need to survive. That’s the amount of money you need to buy groceries and pay the mortgage.

But most people look at all their money as scared money.

I was like that for most of my life. But then I started practicing Stoicism and applied it to my money.

I still have scared money, but it’s just a small part of my total wealth. I bet big on assets and I’m not afraid of losing that money because I don’t need that money.

Not being afraid of parting with your money is the only way to win big as an investor.

You just can’t deem all your money as scared money, otherwise, you hold on to it forever. As the rapper Jeezy once said:

“You scared, scared money don’t make no money.”

And once you put your money to work, you’ve got to be so optimistic that there’s not a single doubt in your mind that the global economy will keep growing.

When you adopt that mindset, you get scared when you don’t invest.

Happy investing.