The difference between a person with a finance or accounting degree with a CFA and your average portfolio manager, is a lot of mistakes and time in the market. Remember you can't buy time and experience.
So the first lesson I learnt is really quite a simple one. Unfortunately, I am obviously not too smart, because I learnt it at least twice.
Flash back 2009. Second year of articles, definitely not earning enough, only money I have saved up is from running some promo's and saving money every month. At Deloitte we had the newspapers in the tea/coffee area, and I read them. To summarize:
"American bankers were super greedy, but also shifty, so they used some fancy finance lingo and sold "assets" that were basically worthless and now the world's economy is collapsing."
Here a couple of people talking about how cheap shares were. Light bulb, let me get involved here, so I go onto my bank's website (FNB) at the time and open an online account. About a week later, many documents courier etc. I can put my life's savings (disappointing small number) into my account. Now what? No idea what shares to buy, given I am a finance honours and accounting graduate, studying for my CFA. This is the point you realize, I know the formula to build the optimal portfolio, I can do Black-Scholes option pricing, but I really know nothing. I can guarantee the first thing a graduate is thinking is what company is on a low PE that is cheap. (We'll get to another lesson in the future on this, but inside when someone says that I shed a tear).
So my solution is talk to people. So as one does, you go out with some friends, make some new friends, and before you know it you know like two analysts. So you talk and you start actually learning. So I took a few hints.
LESSON 1: To be honest listen to people, but make sure you do your homework. I have been investing for 7 years. Outperforming the market by a country mile. I'll happy tell you what I bought or even what I am buying and why, BUT I never feel I can tell you what you should buy. You need to be comfortable with your decision. Your friend ain't going to lose his money when you buy shares. So if someone is like this is a sure thing, I am the expert, firstly listen, maybe they have some points but most likely they are wrong.
Luckily is was 2009, so actually I could have picked almost anything. So first 6 months, over 100% return with paying over 100% in fees! Yes that's right FNB made more money than me, mainly because I started with very little.
So during 2009 I bought a share "Pallinghurst", somewhere round R3 a share. Now at the time Pallinghurst was just getting going, but their CEO Brian Gilbertson, ex BHP Billiton, obviously had a lot of street cred on the market. They had a story, at the time I was like amazing story, our days, I read the story like a German bedtime story: "if the house looks like candy, there's probably a witch waiting for you while you tuck in."
So couple of month later boom Pallinghurst at like R6.5 a share. This is when you realise you theoretically know everything, accept what price to sell the share at...... Where were the notes on that? Unfortunately my analysts friends were out touring Indian partying (work), so nobody to ask. So the share then goes down to like R5.5 by the time my friend gets back. So I was like should I have sold, and he gives me the long term speech and goes back to the story we were told. So I didn't sell it. I sold Pallinghurst about 1 year later for about a 15% loss! In just over two years in trading had never made a loss. This one loss though taught me several things.
Lesson 2: At some point you need to have enough belief in yourself to make a call. You can't rely on someone else to give you answers all the time. This links to me saying you have to commit or give you money to someone else, who is committed.
Lesson 3: I didn't really know what I was doing (at the time). You need to know the value of a share else you don't know when to buy and when to sell. You are just guessing, and the market is this constantly moving beast that is unpredictable. Over time experience makes it easier to see some movements but there is always enough crazy people to make sure you wrong.
So I lost probably like a few hundred rand, but the three points above will hopefully save you some.