“I was doing everything right… then I made mistakes that cost me nearly £20k” - audience member
How Amy did the right things to begin with
Amy is a member of our audience and got in touch to share her investing story which contains some big lessons.
She grew up in a working class family. Her view was that only rich people did investing.
She managed to get a good job that paid well. She was a junior software engineer at a tech company, whilst she said her peers were laden with debt at uni.
She went on holiday with some mates when she was in her 20s and came across a book about personal finance. She lapped it up. The book was about compounding. She wondered why she didn’t know this stuff (we’ve all been there...)
She opened a Fidelity account and started investing in index funds.
She did the ‘right things' - investing consistently into index funds until 2020. She built a pot worth almost £50k.
She thought she was a genius.
But the markets had been on her side… until they weren’t.
The Covid dip
The outbreak of Covid and lockdowns shook the markets.
Amy saw her investment balance dropping daily. And dropping. And dropping.
She was checking her apps frantically. When she realised she was about to go down overall - her pot was going to be lower than the amount she’d invested - she couldn’t let it happen, so she sold everything.
And because she’d sold, she missed the massive bounce back, which happened soon afterwards and took markets to all time highs.
If she'd just held on she'd have been in an even better position than pre Covid.
She felt helpless and embarrassed.
Of course we all understand concepts like wanting to buy low and sell high, but it’s easier said than done. You often have to go through this kind of experience to learn - and then you’ll look at moments like these in the future as opportunities to buy (rather than sell) because when there's a crash it means the same stocks have just got cheaper.
When crashes happen, there is often a misguided feeling that ‘this crash is different' (this was an unprecedented pandemic after all) - but that’s not what’s happened historically. Crashes have never been permanent. There has always been a bounce back - it’s just been a question of how long it takes.
In the case of Covid, the bounce back was near immediate, so Amy felt like a mug.
Amy chased her losses
After selling her Fidelity pot, Amy still had a fair chunk of money, and she wanted a quick win to get back to where she was.
She saw some social media ads that seemed to be speaking to her directly - they offered her a way to recover her Covid losses.
She took the most guidance from a creator Call Me Kevin. She said a lot of his content was well thought out. He was very convincing. He was making gains in that period.
He advertised a course on stocks and the psychology of money, which was just under £500, and Amy bought it.
She said some of the content was really good. She learnt some things. She started to connect with others in the community which was great because she no longer felt alone. She found safety in the herd.
Collectively they started investing in things that Kevin was promoting, and they celebrated together because the stocks generally went up to begin with.
She started to get confidence because the initial trends looked good. But then the shares that Kevin promoted started to go down. And then more did. And more.
At a certain point, she’d invested in over 30 stocks because of his suggestions. As they started to fall in price, she didn’t know what to do except not to panic like last time with Fidelity - but she says she got the two situations the wrong way round. The former was long term passive investing and the other is short-term, high risk trading.
She decided to sit on the stocks she’d bought.
She was still refreshing her trading apps all the time.
She was waiting for confirmation bias. She’d scroll through Twitter, waiting for the one Tweet to validate her (saying one of her stocks was good).
Lots of the stocks that Kevin recommended went up initially, but Amy says she didn't see when or if he said to sell... and then the stocks started dropping.
Community members were getting annoyed - their portfolios were down - and Amy was shocked by the position fellow members were in. Some had put the last of their money into Kevin’s courses and these investments. She said one person had skipped her rent one month to buy his course and some of his stock picks.
These conversations are what made Amy realise she needed to get out. She'd desperately wanted to be right but she finally acknowledged to herself that she'd got it really wrong.
What Amy learnt
She doesn’t hold any resentment towards Kevin or blame him. She blames herself.
A saying that stuck with her goes like this: “Holding resentment is like drinking poison and expecting your enemy to die.”
Amy is grateful for the experience because it’s made her a better investor and more self aware which will stand her in good stead in the long term.
She’s now mostly invested in passive index funds, but because she knows her character, she’s got an amount of money she can mess around with, for picking stocks - 'fun money'.
If you do this (fun money), the general guidance is not to put in more than 10% of your investable assets.
