Especially when it comes to money, mistakes and losses are a painful process. So painful that some people prefer not to invest because of the risk of a loss. In 2020 there were a total of 5.3 million people who invested their money in the stock market. In contrast, 7.3 million people regularly play the lottery. The regular loss of around 10 euros when filling out a lottery ticket does not appear to be as painful and risky as the possible loss on the stock market. I have already written about what risk means here. The bottom line is that it means nothing other than that I don't know the outcome of my assignment. That actually applies to playing the lottery and investing.
With the former, however, I have to rely on pure luck, with the latter I can at least reduce my risk with knowledge, some research and broad diversification. For most, this sounds too complicated. You are afraid of making mistakes. Because then I can't blame others, but have to take responsibility for my own failure.
From your own failure
That's exactly what I want to write about in this column: about your own failures and mistakes when investing. my mistakes So how do I define the biggest mistakes? Are they the ones with the most losses or are they the ones I feel the most painful? Or the ones I'm a bit ashamed of because it wasn't bad luck, it was my own failure?
When I first got into investing, I read about ETFs. In the book "Börse easily understandable" Judith Engst and Rolf Morrien write how the stock market works, why the stock market is not dangerous and how the DAX has developed in recent years. The extrapolations of what could have happened with 1,000 euros and how much money could be made with it convinced me. So I immediately opened a stock account and set up an ETF savings plan. On the DAX.
That's why you shouldn't just invest in one market
An ETF on the DAX is a mistake in many ways. At least if you only save one DAX ETF. Because that is already violating one of the most important rules of investing: never put all your eggs in one basket. When the DAX still consisted of 30 instead of 40 companies (until two weeks ago), four companies from the automotive industry were included: BMW, Daimler, Volkswagen and Continental. When the automotive industry is doing badly, the economy is doing badly. Also because every third job in Germany depends on it. According to the magazine "€uro am Sonntag", around a third of the total turnover of the DAX members depended on the automotive industry. To be honest, I didn't give it much thought and started investing.
I was lucky because, as you may know, the German economy has been doing quite well for the last eight years - despite the diesel scandal. Nevertheless, this was a mistake: I just went for it without thinking about diversification and economic dependencies. Engst and Morrien had convinced me. I also wanted to achieve the return that they explained using the DAX as an example.
When people ask me today how they should invest, I tell them that they first have to think about a strategy and invest in as diverse and independent sectors as possible in different regions. At the end of the day, a financial or corona crisis can tear down entire markets. Then the motto is to take a deep breath and stay calm.
What stock trading and football have in common
Another mistake I could name is my investment in Wirecard shares. Here I just let myself be carried away by the hype, like some people at Tesla are doing today. In contrast to Tesla, the numbers looked a lot better and this time I did my research at least: The company value had tripled in two years, sales doubled and profits in 2018 were 347 million euros.
In addition, it was a global company in a high-growth market and cooperation with Alipay and WeChat Pay and based in “my” city of Munich. I was a bit proud of it, like football fans are when their favorite club wins. Of course you don't contribute anything to it, but you have such a strong "home bias" that you just feel good when you succeed. The numbers were right, the prospects for the future looked good and of course people who worked there were known. What could have gone wrong? We all know the answer to this question.
Of course, you can't see an accounting scandal until it's made public. But I could also have listened to the critical voices. There was also negative reporting from short sellers who had bet on falling prices. In 2019, the "Financial Times" reported on discrepancies in financial accounting in the global corporation's Asian business. The financial regulator BaFin reacted in both cases – against the short sellers and journalists. I was reassured.
What I learned from this: When buying shares, always research in all directions and take critics seriously.
The 3,000 euro mistake
Now we come to the most expensive mistake. The one that really annoys me and cost me the most money, the one that makes me a little jealous when I read that other people didn't make this mistake. And at the same time the mistake I warn about most often.
When I was studying, I worked a lot. Sometimes I had several jobs at the same time and let my studies run on the side. It was important to me to make money. Money that I didn't save or invest, but spent with both hands. For clothes, for trips and especially for going out. Back then I could easily have raised 50 euros a month to invest it. For Munich students, that might sound like little money. But I studied in Leipzig, where my rent including heating was 200 euros.
50 euros that I would have invested regularly in a classic ishares MSCI World back in 2009 was 6,670.50 euros today minus all costs and fees. I would have raised 2,880 euros myself. Even minus the taxes, I would have doubled my money. Had.
So if you're still toying with the idea of whether you should invest or not - the answer is yes, invest your money. No matter how little it is. In 10 or 20 years you will be happy about it. I have yet to meet anyone who has invested broadly and regretted it.
Margarethe Honisch is a financial blogger and author. On her website Fortunalista and her Instagram account of the same name, she gives tips on retirement planning and investments. She writes the column “Make more with money” for Business Insider.
