10yrs savings, gone. New investors? Don't.

4th May '22 by Noobvestor

35 comments 1653 reads

Just thought I'd share a brief leaving post before unsubbing in the hope that any uncertain new investors come across it and reflect before getting involved.

Spent my life living frugally and saving. After about 10 years of working as a professional I'd secured a decent sum which I was to put towards my first house.

Decided instead spontaneously to invest, Jan 2020.

The months since have been a comedy of risky and ultimately wrong decisions to try and claw back lost capital from the initial covid plunge, and now, having overextended into the hype train of various Stockopedia commentators, I have now lost almost all of my original capital, and have spent the last 18months paying tax on money that I've lost. I hadn't lived paycheck to paycheck since my days in university, and yet here we are again.

The depression has recently improved and I'm able to comfortably make decisions again, including to share this with you, for really only one reason - maybe if I'd read something like this before I'd started investing I wouldn't be where I am today.

New investors? Take pause, and honestly, don't bother. Invest in real estate instead. Stop being greedy and 'hopeful' and be real. A few stupid decisions can destroy your life, and really, it's just not worth it.

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FederalReverse

4th May '22

Very sorry to hear of your losses, in hindsight a very unfortunate time to have entered the investment landscape.

A few people have mentioned it here already but just to emphasise, I've never considered the SCVR stocks that are regularly followed here a suitable universe of stocks for most investors to concentrate on. A portfolio full of UK companies at this size is so much more risky than a broad portfolio of mixed assets, equities, bonds, property etc. I have a small portfolio of UK stocks of all sizes, from small caps to global giants, and still only make that a maximum 30% of an overall portfolio. The rest is in mixed global investments, which seems to reduce volatility materially. I agree with other posts that maybe Stocko should look to rebalance analysis to some mid and large cap stocks, not only UK based but also international. Size factor is often considered important alongside value, momentum, quality. Ignoring large companies through certain market conditions is always going to prove detrimental, at least in the short term.

GloucesterBob

You cannot blame Stocko for your decisions, the post is very unfair.

I am around 25% down over the last 18 months but still 100% per cent up from when I joined Stocko 3 or 4 years ago.

My recent loss is because I changed my stringent 20% stop loss rule, but that was my decision, no one else's.

Hopefully new investors will learn to grow rich slowly, not chase losses and more importantly all the articles on here are only starters for 10, owning property is not the gravy train it used to be.

Snowbum

Edmund Shing’s excellent blogs give ample coverage to ETF’s imo.

Chris Brown

Bear in mind Boohoo (LON:BOO) was first flagged by Paul in his SCVRs multiple times in 2015 at the 20p level. My biggest missed trade was failing to buy in at that time and it would still have 3x'd from that point to today, even after the recent crash. More than 10x at its peak

Those buying in over the past few years should have sold when they were down 20% or so from their buy price. That is the basics of risk management for me. One of the first lessons all investors should learn is to avoid holding on to losing positions due to behavioural biases. Unfortunately, it is a lesson which has to be learned through experience.

I'm 12 years into my investment journey now and would strongly recommend new investors only play with small sums of money for their first few years. The markets have been a rollercoaster ride recently.

GrahamF

5th May '22

I’m very sorry to hear of your experience.

There does tend to be some group think on the SCVR from time to time. And there was a bit of a tendency for a pile on against anyone who expressed contrary opinions to the perceived ‘wisdom’ at one time. So, inevitably, the naysayers start to shut up and the place becomes a bit of an echo chamber.

The old adage of not having all (or too many) eggs in one basket is the best advice that we often forget. Even those fund managers running ‘concentrated’ portfolios typically have maximum size limits on their positions to avoid a total disaster.

So, with any investment, real estate, shares, bonds etc. don’t have too many eggs in one basket.

SCI20

It seems to me that Stockopedia is at a pivot point in its development. The continued focus on UK small cap, the preoccupation with retail stocks especially, is helping no one at this point in time. With the exception of Edmund Shing the presentation of investment ideas outside the small caps is limited or none existent. Mid and large cap UK stocks, mining and commodity stocks, US stocks and ETFs have provided and continue to provide both balance and growth.
The stock reports are excellent and an invaluable tool but without more regular content of the wider investment market Stockopedia is losing its relevance.

DaviStoVest

In fairness, Roland Head's SIF commentary is also more broadly focused, including all sectors and segments of UK stocks ... albeit not international stocks or funds/trusts/ETFs.

But your basic point still holds and I agree with it.

TStubbs

I think it was very easy in 2020 for young new investors to get caught up in the hype of the day which was coming from the USA with the Robinhood / influencers / crazy gambling easy money rumour circulating on top of bitcoin volatility and the US government handing out a Covid stimulus cash payment to all its citizens - to young people it looked like an easy way to double, triple your money- everybody was right?
You though clearly did the sensible thing of signing up to Stockopedia getting access to info and took a mature sensible approach, please don’t get me wrong I’m not saying that you were part of the craze, just that it was in the air at the time, that was my point.
Stocko does have great info and is particularly useful at bridging the gap where most people don’t train in finance and don’t understand the nuances of company reports but we all need to have access as we all have savings/pensions at some point and the bank pays out no interest. In Stockopedia’s defence they provide good initial videos and explain clearly the NAPS methodology and this style is a winning style- we all go off piste on our own.
As others have said it would be amazingly good to have commentary in other areas of the market too. 99% of the population don’t understand investment, the lingo, acronyms, report figures and miss the all important reading between the lines etc. To have it analysed by people with natural aptitude is what many of us pay for.
Small caps is my chosen pool because it has taken me 30 working years to be in a position to put some money aside for old age and I’m trying to play catch up and I have other eggs in other baskets and in bigger caps, but up until a few years ago no pension which is scary in your mid forties. Also keeping your money, in those initial days of Covid was the hardest most worrying time - my capital more than halved and I had many sleepless nights. Most of us have understood your mental struggles and we’ve all been through the mill and most of us are still finding these extraordinary markets really hard. I feel that Stocko got me through as I managed trade back my money and some, though those ‘gains’ have slipped away mostly, and I know I would not have been able to do that without 1. Experience 2. Community sharing their analysis. The importance that Paul and Graham, plus all the commentators have put on strength of balance sheet and avoiding blue sky etc has saved my bacon. I fell foul to BOO too, you don’t win them all as Paul regularly reminds us, and is generously open about his personal trades and feelings. As are the others who open up their process.
Noobvester most of us have been where you are and you have gone through the gates of experience which always comes at a price. You will be richer for it one day. Take care don’t despair it’s not easy, and best of luck.

I disagree, Edmund Shing’s blogs have been a part of the offering for years now - the fact they are under-utilised by the readership is not the fault of Stockopedia.

I have found them to be highly informative and have made use of many of the recommendations. Whilst it is definitely desirable to have wider coverage of the whole market, mid/large caps, the primary reasons i subscribe to stockopedia are for the screening tools and stock rank data. As someone who has specialised in commodity stocks a little too much in the past , it was this focus on U.K. small caps that drew my subscription to give some ideas for further research in an area I knew little about.

Investing in individual commodity stocks takes a different skill set imo, and needs specialist knowledge and experience of investing in the sector to make it work. Of course everyone wants to jump on the bandwagon now, seeing as they are doing well in a sea of market turmoil, however no-one cared when they weren’t doing as well, in fact many posts on stocks in this area I’ve made personally I’ve over the years were viewed negatively by the readership.

So it’s really all back to how people use the platform and not being lazy, as we all say here DYOR.

Stocks123456

Wise advice! I wish i had bought property too rather than squander savings on stocks. I've lost a lot following commentators on here. No one has a clue about share valuations!

Trident

If you look at the foundation of what the CEO Ed Croft said was his inspiration for setting up Stockopedia was, was to illustrate we could overcome our 'Monkey Mind' when setting out to invest - i.e avoiding getting caught up in emotional investing. I think they have delivered, but inevitably everyone tires of saying the same thing, and investment has always been part of a sort of hobbyist mindset for many (myself included). That means more 'entertaining' commentary, as Quant investing can be a dry subject, though Ed's enthusiasm was quite infectious.

Ed used to insist his commentators publish their portfolios, but this too has largely lapsed. So you do get a slightly one sided commentary for certain stocks, and you wouldn't be human if you admire the writing to follow along sometimes.

That said we are all old enough to be responsible for our actions, and much of the Stockopedia commentary reflects many mistakes made in the past. So caveat emptor.

I do occasionally check using the Stockopedia tools that I am not too exposed in one sector. Also, I would recommended you look across your total 'wealth' portfolio, and by this I mean property, work, pension, and investments to see that your 'wealth' in its roundest sense isn't too narrowly focused on one area.

Recommending large exposure in property is just as dangerous, as it is with shares.

ken mitchell

Like others I’m sorry to read of your plight. Perhaps you made a key mistake, (and quite likely there are other Stockopedia subscribers making it too) in not realising that investing successfully means not putting all our eggs in one basket. E.g just the UK small Companies covered here.

What about all the other UK sectors (some like Miners, oil and Commercial Property sector have done very well and sometimes with bonus of very big dividend yields too).

And what about the rest of the World? The World can be invested in via Investment Trusts. These pooled investments are far less dangerous than single shares, and novice investors should seriously consider finding out about them and then investing in them wisely. . Many foreign markets have done far better than the UK. E.g Vietnam where there are 3 Investment Trusts trading at undeserved big discounts to NAV. A couple of us tried to get an Investment Trust thread going here but there was little interest. The same applies to many other threads including those from the likes of the excellent Edmund Shing. It’s not Stockopedia’s fault that so many here are interested only in UK smaller Companies!

Many UK smaller Companies (and some big ones too) have had a terrible time, and that includes those covered in the very popular and high quality daily small Company reports here. Many are in a big and grim bear market and even Companies issuing excellent updates are either seeing their share prices hit or quickly losing the mark up in price on the day of the good news. There are some fantastic bargains among them that will do very well when sentiment improves at last....as it lays does eventually.

But for now anyone investing just in the UK smaller Company sector has put all their eggs just in a sector that is having a very pbad time. Diversify and look beyond posts and posters here and elsewhere to invest successfully. I’ve got a very diverse portfolio. It includes some of the UK Companies that are doing badly, but also shares and Investment Trusts in the Mining sector that are in a very strong bull market,. AlsoCommercial Property, Private Equity, Japan (doing badly) Vietnam, Europe, Far East etc etc. As a result the portfolio is holding up well with big losses on the bad choices made up by the big gains in the shares and Trusts in successful Countries, Companies and sectors.

Don’t give up! I made the same mistakes as you. Decided to find out how to invest successfully and to learn from mistakes. I still make mistakes and always will, but learning from them and trying not to repeat them is the key. And imo there’s not a shadow of doubt that a key way to invest successfully is not to have all of our investments just in one small part of the UK market.

AND never invest more than we can afford to lose in anything!

KevinS1

Extremely wise words there Ken and some great advice I would strongly urge anyone investing for the first time to listen to.

For the last 25yrs+ I have largely been a Unit-Trust and/or Investment-Trust follower and whilst I always dabbled in the odd single-co-share I never did so with any information apart from newspaper tips - which we all now know can be utter rubbish.

By investing in single-companies rather than a basket of shares you are massively increasing your risk profile. Whilst it helps to have superb commentators and investors through sites like this to help steer you and highlight both pros and cons you must still appreciate they can also be wrong - Paul will often highlight that nobody can be sure and he will tell you of the stinkers he has followed.

Whilst the rewards can be greater if you have a share that goes up you must balance this with the risk of it going wrong. It's very difficult to be right more than you are wrong which is why cutting losses quickly is important (note to self to try this more often!!).

I've moved much more towards the single-company approach with tools like Stockopedia & SharePad where financial info can be analysed and more info is available, buts its still risky, and to be honest I still hold a large proportion of my PF in collective investments, but we need to recognise that in a bear market most things will drop - however good they are.

It's at this point you need to make some very careful decisions - chopping and changing to the next best thing will likely end up just costing you dealing charges and possibly just jumping into the next stock that's going downwards.

Other options which I have utilised in the past can be to become an ostrich and hide - certainly easy to do when in collective investments where you are paying a "so-called-expert" to navigate the markets and make money - whilst they charge fees for this and many of them aren't very good at it, there are some good performers - its wise to check what their holdings are so you can make an informed view yourself before investing - do you think their top investments are wise?

The key is to recognise that nobody knows what is going to happen in the future - will inflation remain a factor or will it drop off? Will China continue to drive shortages, will Ukraine resolve itself or will we become embroiled in WW3? Who knows.

What you can probably say is that in the long-run shares will rise - not all, but some/many, and over what timeframe who knows, but probably in 5yrs time the markets will be higher than they are today. The questions are though will the individual stocks you are in today reflect that higher position?

Personally I think investing was too easy in 2020 and people have been suckered into a high-risk area of the market and are now being hit. Diversification is key along with a long-term view. Ed Shing provides some excellent macro views in his weekly thoughts, but all of this needs to be viewed in the long-term.

As the markets look shaky its important to think about the medium term trends - people are bracing for longer term high-interest rates and a recession - in which case many people will be in trouble as spending cuts back, retail suffers, jobs are lost and the economy gets hit - the markets will clearly drop. However, this bullet could be avoided....who knows and then there will be a bounce until there next major worry appears.

My advice would be to learn how to invest and to invest in line with your capabilities - avoid single companies unless you know what you are doing, utilise collective investments that have a good track record and are run by an experienced manager. Avoid heavily indebted companies and potentially look for safer options in a high-inflation environment and await the market signals that we are out of the woods and at that point jump on the ride.

There are some great ideas/thoughts by many of the contributors on here, but you must DYOR. Set your expectations and avoid the high-risk "rocket stocks" and ask yourself "if they are so good why hasn't their price gone up already"

Best of luck in whatever you decide to do and I wish everyone all the best in their endeavours.

Edward Croft

So sorry to hear of your experience @NoobInvestor. I had a similar experience back in 2008-2009 when I lost about half of my portfolio. I only sold out as I was buying a house - I didn't admit to my wife the scale of my losses. Luckily the losses were all previous gains... but it was still a life defining experience.

My entire investment philosophy developed out of that experience... and while it was financially crippling at the time, it did have a silver lining. It ultimately led to the founding of Stockopedia, the StockRanks and this wonderful community - and it's great to see the support they are giving you here.

The hard truth is that equity markets reverse - and all long only portfolios reverse with it. My own NAPS Portfolio process , which guides my investment decisions these days with a well diversified approach, is down about 10% over the last 6 months. If we're in a proper bear market I would expect it to continue its drawdown. In fact only 2 funds in the IA UK Smaller Companies Sector have made money over the last year - with the median down 12%.

If reversals are a given in share investing, then there are 2 options.

The first is to only invest long term savings that you don't need for anything else so you can weather any intermediate storms. It's sad to hear that you've dented your house buying budget - just as I did back in 2008 - and that took me a lot of soul searching and time to recover from. But if you are young, your long term prospects are excellent especially as you have the saving habit. You will recover from this.
The second is this. If you are speculating on risk capital - then it's imperative to use an active risk management approach - as reversals will indeed happen. Either using stop losses or hedging positions. There is much great literature out there that can help on this. A small loss becomes a large loss - but only if you let it. The disposition effect (where we refuse to sell losers, but actively sell winners) needs fought against consistently.

Another suggestion is this... when investing in shares - it pays to understand each share's volatility. My reason for introducing the Risk Ratings was to try to help people understand that more speculative shares reverse far harder than more conservative shares in drawdowns. I've found a tendency for stock pickers to seek out risk - amongst small and microcaps especially (and even in large cap tech in USA). This happens among the community on the SCVR and generally on the boards. Risky shares do fantastically in upswings, and very poorly in downswings (see Reach today). I've learned that lesson - so when I do invest in small caps - I keep an eye on any "Speculative" risk ratings I own and know that I ought to sell them when they spike over eagerly on enthusiasm.

I hope this is useful in some small way. I know you may not want to hear this right now, but I encourage you to keep thinking and learning about equity investing. It's been a very difficult time, but it's at these times that we can forge really positive new habits that can set us up for life.

DWit199

Ed, as always you write such good sense. Volatility is hardly ever mentioned on here as part of the investment process.

The chart below shows a snapshot from my database of about 750 companies taken in March 2021. The shares are sorted by the 1yr volatility as reported by Stockopedia and then a rolling window of the average total return of 250 shares is presented, the lowest volatility shares on the left, the highest on the right. Over the period the average return was about -1%. The return % figures on the y axis are relative to that. Volatility should not be ignored as it has been a powerful predictive factor.

brads13

It is easy to chalk up gains as 'I am clever, smart etc', but losses teach us a lot more, if we are prepared to learn from them. Often success stories are down to luck more than skill.

Losing previous gains can perhaps be rationalised as 'easy come easy go' but it still hurts. Losing hard earned money is a lot tougher. Losing a lot requires you to re-assess what you still have - a professional career living in the UK probably puts you in the top few % of the world's population. Edward Croft's example of losses lead to creating something (Stockopedia ) is a great example.

I have been investing for 25 years or so. Had a well paying job in finance. In 2001 I lost a lot on the USA market. In 2002 I was made redundant. In October 2008 I lost 85% of my funds in three days (>£100k, starting to sell S&P options in 2007 probably wasn't a great idea, but I learnt a lot about risk, emotions, human behaviour and about myself).

Over the years I have learnt a lot about the markets, become a lot cleverer and can now make very clever mistakes, so progress. A part of my portfolio probably includes the same shares as you Noobvestor (I had always shunned the retail sector) and again that part has losses >£100k, but learning about asset allocation, spreading risk and luckily having some oil shares means (at the moment) I can absorb those losses.

Does it mean the retail sector is a bad place? Well it has been, but who knows what the future holds. You often don't know if your decisions are good or bad until a year or two has past.

Noobvestor - you started at an unlucky time and I can quite easily see how events have unfolded for you. The markets can be very cruel, but they can also be a great teacher. Your post is courageous and as you can see a lot of other subscribers have been there, done that. Most posters only post when they have done well, so it is easy to assume everyone is doing great, but actually most might be losing; what you read is filtered.

Looking at losses as expensive lessons and learning from them means you have gained something. A great place to start analysing mistakes is to analyse your cognitive biases as they are in great abundance on the markets. I think I am guilty of all 20, but knowing that is better than not knowing it.

FreakNomad

It seems to me that Stockopedia is at a pivot point in its development. The continued focus on UK small cap, the preoccupation with retail stocks especially, is helping no one at this point in time.

If you want different types of content, please create it.

FWIW, I don't do any retail shares at the moment, and I'm focusing on other stuff.

I started drafting a couple of effort posts on this and that, but they are a lot of 'effort' so they are unfinished and haven't been posted. Creating quality content is difficult and takes time. Many of us have full lives and can't take the time to do several thousand words of coherent share and market analysis.

I am thinking that many people would be better off focusing on simple value metrics like the PYAD system that was created/popularised by Stephen Bland.

There's plenty of excitement in the market at the moment what with wars and covid lockdowns in China, massive inflationary pressure, etc, so there's a lot of scope for interesting content. Someone needs to write it and I think it should be the people who want this kind of content. At least that way, you'll get exactly what you want.

Bluesky Ventura

Sorry to hear about the losses and depression, and hope you make a full recovery. Not sure if this is of any use, but both my siblings lost every penny quite a few years ago, got into significant debt, and had to seek medical help for depression. Both have come through it and recovered their health and finances and enjoying life to the full again. I am sure you will recover from this experience.

Wish you all the best for the future.

BSV

Blissgull

That was awful luck, and to rub it in, had you started investing just a few months later, just after the covid crash, you might have made big profits.

Although it won't be much comfort to you, there are some lessons which might be helpful to anyone considering starting investing now.

1. It you have a reasonable sum to invest, either from a windfall or by diligent savings, it is much safer to drip feed that money into the market over several years. That allows you to take advantage of "pound cost averaging" meaning you buy more when prices are low and less when they are high.

2. Don't be too keen to claw back losses. That can lead to the type of mentality that sees a gambler, down on the night, risking it all on one last throw of the dice.

As for your last paragraph, suggesting people invest in real estate instead. Well... interest rates and mortgage payments rising. Utility bills going through the roof. A possible recession on the horizon. A market which lookes overheated. No one knows if property prices will crash, but the ingredients seem to be there.

Alphaflight

Very sorry to hear this! May I ask which particular stocks you invested in?

10yrs savings, gone. New investors? Don't.

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Noobvestor

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