Hadi Yousef on Investing

A year ago this week, I bought my first stock.

I remember, as a kid, asking my dad what a hedge fund manager was because I had just watched an episode of MTV Cribs Priciest Pads. The “Wall Street tycoons” had the most expensive homes and I remember one of them even owned an island. After I asked my dad about them, he went into his office and came out with Stock Investing for Dummies in his hand. He told me how a hedge fund manager’s job was to buy and sell stocks for other people using their money and they get a percentage of the profits. I think this was my first formal introduction to stocks (formal because now I had a book to study). I remember being interested in stocks but I didn’t take it too seriously because that world was so distant from me that it almost seemed irrelevant. I never thought one day I could do that.

I always thought stock picking was something only highly trained and educated professionals did. Therefore, I was always very intimidated by it all. People made billions on the market, so it had to be something in which only geniuses participated. Heck, they had their own street in New York City!

At the beginning of last summer, I decided I was going to teach myself what I needed to know to get started. Aside from a basic understanding of what a stock is, I knew nothing about what it really meant to go public and the day-to-day nuances of the market.

I started by studying the great investors. Warren Buffett was the first person I looked at. I watched every documentary of his. Listened to every interview he’s ever done. Read his annual shareholder letters. I wanted to get inside his head and understand his investment philosophy. One of the things I was most interested in was how he performed during economic slowdowns. Buffett is a great case study because he’s been investing for so long that he’s been through all there is to go through.

After I bought my first couple of stocks, I was at a dinner party where my dad’s friend, who used to be a day trader and now a successful businessman, was sitting at my table. At the time of this dinner I didn’t know he used to day trade. However I did know that he, of all my dad’s friends who are doctors (shocker), would be the best person to talk to about my new found interest. Forty-five minutes later and I’m still going on about stocks. I don’t remember why, but I was kind of trying to sell him on why I bought stock in this 3D printing company. Afterwards, my dad came up to us and my dad’s friend told him that I knew what I was talking about. I don’t remember exactly what he said but it was something along the lines of the fact that I wasn’t messing around and that I took this seriously.

His comments meant a lot to me. It was the first time I got the approval or recognition from anyone in regards to investing. And the fact that it came from somebody I admired was an added bonus. In reality he didn’t know whether I would be a good investor but I guess he saw that I had a natural passion for it.

A year later, I look at my portfolio and at the various trades I have made. In this post I want to, for my own sake, think through the lessons I’ve learned. Here, I’ve tried to summarize the takeaway points.

1. Going against the Grain: The investments where I was most successful were when I bought stock in a company I believed in but that the market had turned on. Many people do this, I’m not special for it. However, it’s much easier said than done. When every article, tweet, and TV interview you see is saying a company has lost its touch and has passed its glory days, it can get to your head. If you believe in the company, this is your golden opportunity.
2. Trust Your Gut: There’s too much noise out there. If you try to get everyone’s opinion about a company/stock, you’ll go crazy and end up in a worse position than that at which you started. Do your homework, trust your gut, and plan for all possible outcomes.
3. Work with What You Know: I never bothered investigating a company that made money doing something I didn’t understand. I don’t care how much money they make. If I can’t explain, in clear terms, to my father how a business operates, then I don’t bother getting involved. If there is a company that interests me, I do my part to learn what I can, and, if it still intrigues me, I then proceed forward.
4. Take Risks: Starting out, all I herd was, “Keep risk low,” and, “Don’t invest in speculative stocks.” What I’ve realized is that all the people who advise this aren’t 20 years old. My risk tolerance is very high because even if I go belly up, I have the rest of my working life to make up for it. The people who advise this tend to be older and less risk tolerable. Plus, there’s a certain thrill I get when I invest in a riskier stock (after doing my homework, of course).
5. Avoid IPO Hype: I’ve noticed that companies with intense press coverage leading up to the IPO never meet expectations, and a major sell-off ensues. However, this is just an observation. I don’t have any stats to back it up.

To anyone who has ever been interested in investing, I encourage you to fight the noise and intimidation out there. Do your homework, know what you’re getting into, and, most importantly, enjoy it. Money is a taboo subject in our society, which doesn’t make sense given how vital it is. In most cases, your retirement will be tied to the markets Thus, by educating yourself at a young age about how the financial world operates, you are doing yourself a great service.