• The Seville Reporters

Why You Suck at Investing.

Updated: Sep 22, 2020

If you suck at investing it's okay, we've all been bad at something. But do you know why you suck or why you're not getting the returns you desire? We've outlined seven reasons why you probably suck at investing in hopes that it will help you turn your investing around. The first step in fixing an issue is recognizing that there is an issue. So if you're reading this you are on the right path. Here are seven reasons why you suck at investing.

Investing doesnt have to be this hard, just follow a few simple rules

1. You're Not a Believer

You've heard the stock market has the potential to make people money, but you're not sure. Also, you don't know anyone personally that has made a ton of money in the markets. The people that you see on TV who have made a ton of money in the markets appear to be smarter than the average Joe or Jane. Because of these issues you dabble here and there, you put some money in and take some money out, but never really committing. This is a reason many people suck at investing.

S&P Chart from 1980 to April 2019
Source: E-Trade

If you look at this chart of the S&P 500 since 1980 you'll notice it's gone up a lot since 1980. The market has experienced several dips and down cycles but overall the S&P 500 has gone up over the long term.

To not suck at investing you have to believe that over the long term the markets will continue to go up, and that if you feed the markets with your dollars, the markets will add profits to your dollars over the long term.

When you become a believer your attitude changes, you stop throwing some money into a stock here and there, and you start funding your investment account aggressively, because you know what could happen over the long term. To not suck, you've got to believe.

2. You Don't Know if You Want to Trade or Invest

You may suck because you don't know what you want to do and you don't know how to do what you want to do. The general consensus of all market participants from very green to very experienced is they want to make money in the markets. But what experience investors have over the novice investor is they know how they want to make their money in the markets.

Too many people who suck at investing aren't investing, they're trading, and they are bad at it. They're in a stock today, it's down a point or two, they're selling out of it and trying to jump on the next stock they hear about that is moving. In and out, out and in, with no real gains on their money.

Do You Want to Invest or Trade?

The quick in and out style of investing is trading, and trading is difficult. No matter how many millionaire traders you see on Twitter and YouTube you need to understand they didn't get there by trading off of an app; and they have sophisticated systems they use to trade. They've also spent years working on their craft. That also applies to people like Warren Buffett and Carl Ichan; they don't trade, but they've spent years understanding how to invest and make winning investments.

In order to not suck, you need to figure out if you want to trade (hold stocks for short periods of time to take advantage of market momentum) or if you want to invest (buy companies and hold them for a long period of time in hopes that their values increase). Once you choose one, you can then work on not sucking at it.

3. You Don't Have an Investment Plan.

If you fail to plan, you plan to fail. This rings true in investing as well. Before you enter the markets you should have a plan. To create a good plan you need to decide why you are investing. Are you investing for retirement, or to purchase a house in the future, or to get super rich, or for future education expenses? Think about what you're attempting to get out of the markets and what your risk parameters are. Decide if you are going to invest for income, safety, or growth. Having an investment plan will keep you focused and it will prevent you from putting your money into the latest investment trend or hot stock tip. If you want to not suck at investing you need to create an investment plan.

4. You're Selling When You Should Be Buying

This seems obvious, because if you were doing the opposite you wouldn't suck at investing. Knowing when to purchase a stock is more art than science but here are some things you shouldn't do. You shouldn't purchase stocks immediately after hearing the stock has made a big move over a period of time.

Investors that don't suck buy low and sell high, then repeat
Graph: E-Trade

CNBC, Bloomberg, and the other financial networks report the sizzle. When they report that a company like Lululemon for example has increased 50% over the past four months, that is not a signal to buy Lululemon's stock. For professional investors, when a stock makes a big move and gets media coverage, the party is over. That is when professional investors unload their profitable positions to people who want to get in after hearing about the big move.

 Investors who suck buy high and sell low
Chart by E-Trade