What I learned from investing after making a huge loss
A journey from trading to investing!
It all started in August 2020 when my friend told me about his trading triumphs. He used to throw big numbers at me — “Hey, I made this much profit in a day” or “Hey, I doubled my principle in 20 days”. And, like any other youngster, who wants to get crazy rich, I was also attracted to this so-called “ easy money-making” scheme i.e day trading — which eventually became a dark hole for me.
I was just 21 years old interning at a firm with not much savings. But, when I got to know that my friend is minting money by doing trading. It was simple — I wanted to make money from that too! Not knowing anything about stocks, futures, or options, I jumped into the sea of trading.
Whatever little savings I had, I gave it to my friend to trade with that. Because my capital was not huge (around 35000 Rupees or 500$), I was told that I can earn around 5000 Rupees on daily basis. And, I was all excited that I will make good money at the end of the money.
First day, I make a loss. Second day, I make a bigger loss. By the fourth day, my capital has gone to zero.
Dejected by the loss, I thought luck wasn’t by my side this time. Let’s give it another try. So, I used my credit card to add capital and give trading a try once again. I know bringing credit cards to these scenarios is the worst possible thing to do but all I had in me was greed that time. Greed to make more and more money. So, I didn’t care about my previous loss and entered again.
Again the same result. And, now I have not only lost my 35k capital but also 25k more which I took from my credit card.
It was a hard-hard time for me. I wasn’t earning much. I was just an intern who started his career. I was left with Z-E-R-O savings. That’s when I decided this is a scam, this whole stock market is a scam.
But, to my surprise, it doesn’t look like a scam now after 10 months. Yeah, I lost the whole of my savings money last year just by diving into deep water when I didn't know how to swim but the phase after that where I read about investing(not trading), learnt about analyzing the fundamentals of the company, what are different asset classes changed my perspective.
To sum it up, as Benjamin Franklin said
An investment in knowledge pays the best interest.
After gaining knowledge about the whole stock market world, researching companies, creating investment goals, I restarted my investment journey — not trading this time. Investment journey!
I started investing in index funds, small-cap, mid-cap, bluechip, and debt funds. Also, created a pool of long-term companies where I invest systematically — which are basically SIPs I do. Along with that, I started investing in gold- in India, SGB(Sovereign Gold Bonds) are the best places to invest if you are investing in gold. I diversified into different asset classes and now, I just sit profit-tight while different businesses are minting money for me.
Not saying, trading is a bad idea or anything. But, don’t drive a car when you don’t know how to drive one. Learning is the key! First, learn and then earn. If you know the basics right, do whatever works for you — invest or trade.