The biggest obstacle to achieving one’s goals is that the path to them is lined with doubts, lies, bullshitters and many other things that distract the ambitious wanderer. The longer the path and the further away the goal, the more difficult it is to stay disciplined.
Investing has never been so easy
Investing has never been as easy as it is now. There are opportunities everywhere to build up a small fortune through investments with little capital. Discount brokers offer low fees and the internet provides us with a wealth of content to help us make our investment decisions. Platforms such as SeekingAlpha, YouTube or Twitter not only give us the raw data, but also a breakdown and evaluation by “experts”.
In some cases, we no longer have to think for ourselves, but can even copy the behavior of other investors or traders one-to-one. This enables us to participate directly in the knowledge and good performance of these investors and often, we only have to pay an insignificant amount as a commission and fee.
With etoro’s “copy trader” feature, for example, investors can even automatically copy other traders’ trades. All they have to do is transfer some money to their account. The software then does the rest. Given the wide range of possibilities, there are hardly any excuses for putting excess capital to work for you on the stock market.
I can only encourage everyone to get started
Given this great environment, I can only encourage everyone to invest capital in companies and thus participate in rising profits and a prospering economy. With this blog, I want to show how a simple approach can generate cash flow from dividends over years and decades.
It is relatively easy to get started with investing. All it takes is a few hours to find your way into the topic. Books, blogs or platforms can help and I can confirm that the publicly available and free material provides a wonderful and more than helpful overview.
The advantages are obvious. Over the years, a considerable fortune accumulates. Dividends create a steadily growing stream of passive income. This financial cushion provides peace of mind, especially in stressful phases when things are not going well at work or when it comes to retirement. If you start saving and investing early, you will benefit from compound interest in the long term.
There are many stories of ordinary people who have amassed million-dollar fortunes over the decades with modest jobs, motivating them to stick to their own path and not deviate from the goals they have set themselves.
People are talking a lot
Unfortunately, many new investors fall for charlatans and bullshitters at the beginning of their investment career, who lure them into the stock market with false promises or dubious WhatsApp groups. In the worst-case scenario, new investors quickly lose interest in the stock markets and turn their backs on them because they have had a bad experience.
The biggest problem with this is the chatter and noise of people who think they have a clue or who misuse their knowledge and experience to take money out of the pockets of inexperienced investors. The truth is often distorted.
High dividend income doesn’t mean great stock-picking
There is a YouTuber who inherited a company, sold it and invested the proceeds in underperforming shares. He can now – despite extremely poor stock picking – live more than luxuriously from the dividends and now gives investment recommendations to young people. One of them is that stocks are superior to ETFs.
This person is virtually useless as a role model for young investors. He had so much starting capital that even his poor performance compared to the broad market index did not have a bad impact on his financial life. However, most people do not have the good fortune of such an inheritance and need to invest their capital as safely and with as little risk as possible. Such people are best off with a broadly diversified ETF. However, when they hear about the high annual dividend income, they automatically conclude that they are dealing with a particularly savvy investor.
Anyone who can save €/$ 20 a month should invest the money in an ETF. Investors who invested in an ETF on the MSCI World Index 20 years ago would have invested around €/$ 5,000 and the portfolio would be worth almost €/$ 15,000.
Swing trading, stop-losses, or other shenanigans
Investors are always trying to beat the broad market with stock-picking and certain strategies. This may work for a few years, sometimes even ten or 15 years. But hardly any investor managed to achieve an outperformance over a longer period. They gradually lose their outperformance and sink into the crowd.
Funds usually achieve outperformance for a small circle of investors in the hidden at the beginning. The majority of investors, especially retail investors, only jump on successful funds when they have passed their peak, as was the case with Cathy Wood.
The truth is simply that investors do best when they invest broadly in the global market and simply don’t touch the money. All empirical studies back this up.
Investors, and sometimes, I must count myself among them, tend to be activists. They sell at lows and buy at highs for fear of missing out on further price rises.
This also applies to strategies such as swing trading or stop losses. When investors hear that a certain strategy has generated an excess return in a certain period, they drop everything and immediately copy this strategy. In most cases, however, it is only a short period of time in which such a strategy has generated an excess return.
But it is even worse when charlatans develop a strategy based on past price movements. It is impossible to predict future price trends based on past performance. Any attempt to do so is doomed to failure.
Don’t believe the hype
Hypes are also a threat to achieving one’s own goals. If you invest in an ETF, you may be annoyed that there has been no positive development for months while Nvidia shares doubled, tripled and tenfold. But here, too, it is important not to be distracted by such hype. The decisive factor is the long-term performance of a portfolio and not the short-term, hype-driven development of individual share prices.
What people should talk about instead
I am always amazed at how many clicks or views certain content creators get. I notice it myself when I write articles for money. Readers mainly want to get very specific guidance. They want to hear whether they should do something or not. Is Amazon a buy? Should I sell my Alphabet shares after earnings?
Articles on methodology are much less frequented by readers. Yet it is precisely articles like this that provide real added value. I myself also consume content from the FinTwit scene (unfortunately, far too much). However, I look at a few criteria that help me to classify the content and the content creators themselves. According to these criteria, I can see how reputable these people are.
Checks and balances
Checks and balances are a very important point. Only a sith trades in extremes and any investor who claims there is a superior strategy or who reports one-sidedly is an idiot. It’s perfectly okay to be an advocate of a particular strategy. I write a lot about investing in dividend stocks. Someone else trades cash-covered calls or puts. Fair enough. Everyone should strive for happiness. But reviewing your own strategy from time to time is part of sensible risk management.
Sharing mistakes and learnings
Mistakes are still perceived far too often as weaknesses. But that’s nonsense. Every mistake that is recognized as such is a step closer to the truth. Admitting and recognizing mistakes in order to eliminate the source of error is a prerequisite for an antifragile life. I don’t need to know what is right if I recognize and eliminate everything that is wrong.
However, many investors prevent themselves from seeing their mistakes. These include crash prophets (and their unfortunate followers) who have been ranting about the next crash for ages and therefore do not invest any capital in the stock market.
When it crashes, like in 2008 or 2020, they are happy to have been right like a broken clock. But then they miss the best entry point because it hasn’t crashed enough yet. But ultimately, prices do what prices do in the long term: they rise again to new highs across the market.
People who therefore share mistakes and learnings with others have usually understood the principle of antifragility (at least unconsciously). Such people are at peace with themselves and live in harmony. They are, therefore, much further ahead than any crash prophets or stock gurus who, in case of doubt, would even fail to correctly forecast the weather for the next two hours.
It takes a great deal of honesty if I want to appear serious. However, this requires not only admitting mistakes but also disclosing one’s own motivation.
What motivation do I have if I promote gold as the investment par excellence and at the same time belong to a gold trading association? Am I really convinced that the world is coming to an end and gold remains the only currency? Or do I ultimately not really care whether the world ends as long as the sheeple, spurred on by my scaremongering, buy gold from me?
Many content creators are simply not honest with their followers. They provide one-sided and distorted reports about the world without allowing alternative perspectives. People like them do not respond to corrective voices or criticism. They brag about their good trades after they have closed them, but never in advance with an announcement. They are wrong ten times with their strategy but continue to be confident that their strategy is superior.
I also exposed myself to their content for quite a long time, simply for the sake of being triggered :). In the meantime, however, I have refrained from doing so because it is a very poor investment of time.
But it still makes me a little sad when I think about how much additional stupidity and false facts they distribute to the world.
Motivation keeps the motor running
For every ten charlatans, there are one or two dudes who do a really great job. They create content that helps you stay on the ball.
There are a few bloggers in Germany who have been reporting soberly and calmly about their investment lives for over ten years. They are transparent, they are stubborn and they don’t try to lecture anyone or sell any expensive seminars.
I visit them myself and read their reports to stay on the ball. I partly owe my own path to them.
Such role models and their constant motivation are very helpful means of achieving your own goals. Otherwise, you will get lost in the sea of superfluous noise.
The easiest way to separate the wheat from the chaff and recognize a charlatan is to ask which approach is superior in the long term. An ETF savings plan or stock-picking based on strategy xy? If you were to ask me, my advice would be simple. Go to work, be modest but don’t live like Diogenes. Instead, invest your capital in a global ETF and enjoy the rest.