What I’ve Learned from 12 Years as an Investor

This year marks 12 years that I’ve been an investor. I started investing when I was 12 years old, so half of my life has now been spent as an investor. Here are a few of the things I’ve learned along the way thus far.

The greatest investments are in plain sight. 

My greatest investments haven’t come from obscure companies that few people have ever heard of. Netflix, Monster Beverage, Chipotle, Starbucks, and Panera Bread are among my best investments from the past 12 years. I’d bet that some of the best investments over the next 12 years will be companies behind products, services, or apps that you or your friends know and use today.

Pay attention to the world around you. 

All investors — especially newbies — should start by looking around and seeing which companies play an integral part in their lives. There’s a good chance that Starbucks, Amazon, Google, Netflix, Apple, and other promising businesses are on that list… Those are good places to explore investment ideas.

Keep it simple. 

Don’t invest in something you don’t understand. If you can’t figure out how a company makes money or explain the purpose of its products, you shouldn’t invest your hard-earned dollars. (This should eliminate any and all penny stocks from the equation, by the way.) Simplicity trumps complexity every day of the week.

Patience is your biggest advantage. 

You’d be considered insane if you checked the price of your house or car every hour, day, or week, but somehow this behavior is considered normal when we’re talking about stocks. When you buy a stock, you’re buying a piece of a business. Oftentimes the best thing to do as an investor is to simply sit on your hands. The longer you can hold your stocks, the better your odds of long-term investing success.

You will get discouraged. 

Understatement of the year. History shows that stocks are wonderful long-term investments, but don’t take that to mean they go up in a straight line. (If stocks only went up, everyone would be investing in them and there’d be no point in me writing this.) There will be times when your stocks are down 30% or more. And it will be painful. If you’re anything like me, going through that will make you question the whole point of this investing thing.

But, if you stick it out — even if you’re just burying your head in the sand and ignoring the chaos around you — you’ll find that you come out ahead (and then some) over the long term. And if you have an especially strong stomach and buy stocks when everyone else is panicking, well, you’ll likely be a very happy camper.   

You will lose (sometimes). 

Not every stock you buy will go up. But think about this: Michael Jordan made just about half of all the shots he took as a basketball player, and he’s considered the greatest player of all time. You don’t have to be right 100% of the time to be a successful investor, just as you don’t need to make every shot to be considered the greatest basketball player in the world. Diversify, and expect 4 or 5 out of every 10 stocks you buy to be losers at some point. Your winners will usually more than make up for those losers.

You will be humbled, always. 

Winning and losing stocks alike will come from surprising places. A stock doesn’t care (or remember) what price you bought or sold it at. You will learn a lot of things the hard way, like seeing a stock you passed on — or a stock you sold — skyrocket to new highs. (I’m looking at you, Buffalo Wild Wings.)

Keep an investing journal. 

Whenever you buy or sell a stock, make a quick note in an investing journal to outline your thinking and reasoning. This can be done with something like Google Docs, Word, or a physical journal. Briefly write out why you made that investing decision. As the months and years roll on, take time to reflect on your investing journal to see what you got right and what you got wrong.

Don’t trim the flowers and water the weeds. 

My worst investing mistake hasn’t been buying a losing stock (although I have plenty). Rather, my biggest mistake has been selling future winners like Netflix, Chipotle, and Monster just because they had already gone up a lot.

The biggest mistake most investors make — myself included — is selling a stock that’s gone up and using that money to buy more of a stock that’s gone down. This is cutting the flowers and watering the weeds, and will do a lot to damage your long-term results. Your bias should be to hold your winners, not sell them.

Investing is a mindset. 

Invest stems from the Latin word investire, and some quick Googling tells me this means “to clothe in, cover, surround.” When you start investing, you are stepping into a new mindset. You will recognize that behind every product, brand, service, and app is a company that you very well might be able to invest in and literally become a part owner of that company.

When you are an investor, you no longer think just as a consumer. You think like an owner.

Separate politics from investing. 

This is so difficult, especially in today’s world. I’ve let stubborn political beliefs push me away from rational investment choices — like sticking with stocks, which are proven to be the best long-term investment vehicle available to the public — and instead let emotions get the best of me. Even to the point where I decided to buy silver instead of stocks at pretty much the worst possible time. As I’ve written before:

Most dumb money decisions (like mine above) are made when we tie our emotions to our money, whether we’re talking about credit cards, debt, or investing. And few things stir up emotions like politics.

Be an optimist. 

When you invest, you are by definition thinking about the future. Invest in companies that are solving problems — whether those problems are keeping people entertained (Netflix) or literally trying to save the world from fossil fuels (Tesla). Invest in companies that make you proud to be an owner. Invest in companies that will make the world a better place if they succeed.