A Straightforward View on the Stock Market
And how I make my profits
If you came here for the numbers feel free to scroll down to the absolute bottom of the article as the main focus is on what “strategy” I used. Also a quick disclaimer while this “strategy” worked for me, there are many different factors at play in the stock market that are out of any average Joe’s control and there is nothing is ever guaranteed.
Stats
I’ve only bought a total of three different stocks, but even with events such as COVID-19 in-between the purchase and selling I’ve done quite good. I’ve never sold my shares at a loss and am currently shares-free. I am however planning to buy stocks again soon.
Backstory and strategy
Now the way I look at the stock market is not with numbers, but based on events. It all started when I just turned 18 and had a 1000 euros to spare in college. This was three years ago, EA had just released a new Star Wars game and in typical EA fashion, with all the micro transactions. However this time they went over the top and it was very badly received by gamers. Then something curious happened, since I found out at the time is that EA’s stock also dipped 20%. In my opinion that was ridiculous and decided that once things looked a bit more stabilized and the negative reaction was over to buy some EA shares.
No, I did not try to time the market and predict what the lowest point was going to be, because I’m not a genius math-mastermind…
I also set myself a target of when I was getting out, since it is easy to stay in when things seem to go good. That is one thing that I still do and I also do this in totally unrelated fields.
After that life got busy and I didn’t have too much spare money that I could lose anyway. Last year however I started to work full-time as a freelance game programmer and I was able to set aside some money again to start investing again back in January. I only invest in companies I know -meaning I have an understanding of what they do- and that I’ve been following for quite a while. I follow the companies share prices, but mostly focus on what they actually do and accomplish in their core business. So, I bought shares both on AMD and DELL and set my targets.
AMD’s target hit just before COVID-19 took over the stock market and as usual I sold when I hit the target. DELL however got down to about half the money I put in during the crisis.
Now, I would highly advise you to not react emotionally, both on buying extra as well as in selling of to cut your losses.
I didn’t need the money, so I just kept every share and waited until the time was right and when I actually hit my target. Not a second before, now I have to say that nobody could have predicted Dell is thinking of selling its majority share in VMware and the reaction on the stock market after those rumors spread. However that is beside the point, I could have waited an extra 6 months because I know that Dell as a company although much in debt still has excellent products.
I even rebought some AMD stock when they went down so drastically during COVID-19, as I felt like they were down even more than I initially bought them. I thought this was unreasonable and bought some small amount again. I also put up my targets realistically, but they kept on lowering. I then told myself to just wait it out and only 40 days later I hit my target and sold again.
Conclusion
Now with all that being said, I cannot predict macro-events such as the 2008 crisis. I can however see that the market always recovers from that eventually. I can also say that personally I look at what a company’s main business is and know what they are actually up to. I invest based on that knowledge instead and so far it worked out. I would also say do NOT react emotionally as this could work out in your advantage, but as likely your disadvantage.
The numbers
- 1000€ of shares in EA and got out with a 12.5% profit.(target was 11%)
→ I decided the target based on the value before the Star Wars sell of started
- 2000€ of shares in AMD and got out with a 17% profit(target was 15%)
→ I knew what AMD sales were in some of the hardware stores and also knew what their new chips were rumored to perform at. Next to that both Sony and Microsoft new console generation will run on the AMD platform.
- 2000€ of shared in DELL and got out with 10% profit(target was 10%)
→I’ve always been a fan of Dell and felt like eventually they would grow enough.
- 3000€ of shares in AMD and got out with 8% profit(target was 7.5%)
→This was in the middle of the COVID-19 crisis and I would suggest not doing a ton based on my strategy during such weird events. However I was confident that they would at least at some point in time go back to their evaluation when I first bought the stock and based everything on that.
