10 years ago, the world was a very different place. Even though different themes dominated financial markets back then, the principles around investing haven’t changed that much over time. There are some points that I wish I’d known all those years ago, that would have helped me out going forward. So here are my top share tips that I wish I had been told back then.
Details around specific stocks
The first few share tips relate to specific companies and performance. In my early days of investing, I often bought stocks that were rallying higher. I’d jump on the bandwagon, even though the move had already begun.
These days, I much prefer to buy undervalued stocks. This often means buying even when the share price is falling. Personally, I’ve found the return to be gained this way to be greater than buying an already overbought stock.
Another share tip is that I mostly stick to buying larger capitalized companies than I did in the past. I’m not saying that I need to stick to just the FTSE 100, but the benefit of liquidity and more coverage of larger cap stocks is preferable from my point of view.
Finally, it took me a while to properly diversify the stocks I owned. It’s easy to lump a large proportion of my disposable cash into just one or two stocks. After all, if I believe in the potential then why not hold concentrated holdings? Yet in reality, spreading the risk over a dozen companies I like will give me a much better risk adjusted return in the long run.
Thoughts around building a portfolio
The next few share tips relate to the composition of my portfolio. One key point I’ve benefitted from is actually understanding what I’m trying to achieve with a particular pot of money. Simply aiming to double my money from a share price isn’t really that profound.
Rather, I need to have a set target price that I’ll consider exiting the stock if it reaches that. Or I can invest in a dividend stock with a set aim of the passive income I want to generate.
That leads me on to another point. Dividend stocks might not be as exciting as some growth shares, but regular dividend income is of a large benefit to me (and most other people!).
My portfolio should also ideally consist of a range of different types of stocks from different sectors. I might get a specific share tip from a friend, or like the look of a company myself. This is fine, but as I build up a portfolio I need to be balanced in what I hold. If not, then being overexposed to a certain sector (eg, retailers or airline operators) could hit me hard during a crash.
Possibly my greatest share tip
Finally, I think that the greatest share tip I could have told myself a decade ago would be to hold the stocks I owned then for the next decade. I remember a good friend of mine bought Amazon shares around a decade back when it was trading around $200, only to sell them a short time after for what he believed to be a handsome profit. With the current share price above $3,000, it certainly highlights the benefit of a long-term investing mindset!
