#41 - Top 5 Mistakes I’ve Made in Investing

Author

Graham Schroeder
January 17, 2025

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This week the U.S. government puts more economic pressure on China and I break down the top five investment mistakes I have learned from over the past decade.

Market Recap

  • NVIDIA Balances AI Chip Export Controls and Innovations in Healthcare

  • China TikTok's Ban Unknown

    • Facing a possible U.S. ban over national security concerns, Chinese officials were discussing selling TikTok's U.S. operations to Elon Musk or shutting it down this Sunday, with estimates valuing the deal between $40 billion and $50 billion.

    • While Beijing prefers TikTok to remain under ByteDance's control, the impending U.S. ban has prompted consideration of a sale. TikTok has appealed the ban to the U.S. Supreme Court, which seems inclined to uphold it.

    • The Biden administration has decided not to enforce the TikTok ban set to take effect on January 19, leaving the decision to the incoming Trump administration which will likely not ban TikTok.

  • Vietnam Maritime Corp. Sees Revenue Growth Amid Trade Recovery

    • Trade tensions and tariffs between the US and China have led companies to diversify their supply chains, with Vietnam emerging as a major alternative manufacturing hub. This shift increases demand for shipping services from Vietnam to major global markets like the US and Europe.

    • Vietnam's leading shipping company forecasts a 20% increase in revenue next year, driven by the recovery of global trade and higher demand for international shipping services. The company plans to expand its operational capacity by adding new vessels to its fleet.

    • To capitalize on the recovery in global trade, the company will concentrate on strengthening its presence in high-demand regions such as North America, Europe, and Asia-Pacific. Targeted efforts include establishing stronger trade routes and partnerships to increase market share.

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Freedom Fund Portfolio

  • Friday Freedom Fund Purchase:

    • 13 shares of $SOFI - Sofi Technologies

    • I plan on adding more $SOFI as long as it is in the teens for the foreseeable future. The company reported revenues of $689.45 million in the last reported quarter, representing a year-over-year change of +29.9%. SoFi on Thursday announced that it closed on a $525 million personal loan agreement in the fourth quarter with funds and accounts managed by PGIM Fixed Income which shows steady demand for their lending services.

    • The company added 756,000 new members last year and revenue per product increased from $53 last year to $81 this year. The company could continue to increase its revenue per product as more users adopt more financial services over time in the coming years.

  • Upcoming Positions Quarterly Earnings:

    • 1/24 - American Express ($AXP)

    • 1/27 - SoFi Technologies ($SOFI)

    • 1/28 - Alphabet ($GOOGL), Evolv Technologies ($EVLV)

    • 1/29 - Waste Management ($WM), Teradyne ($TER)

    • 2/3 - Palantir Technologies ($PLTR)

    • 2/11 - Shopify ($SHOP)

    • 2/13 - Deere & Co ($DE)

    • 2/18 - Realty Income ($O)

    • 2/20 - Cheniere Energy ($LNG)

    • 2/24 - Apple Hospitality REIT ($APLE)

Freedom Fund Background: I created the Freedom Fund as a public brokerage account back in October of 2022 to share that anyone with a social security # and a bank account can begin their investing journey by investing a couple hundred dollars a week. Every week and month I post on X (@GrahamInvesting) public updates about the purchases, exits, dividends, and growth of the fund if you want to follow in real time. The biggest obstacle people have to investing is just getting started so I decided to start a new account at $0 to start from nothing with you.

Top 5 Mistakes I’ve Made (and Learned From) in Investing

Next month I turn 32 years old and over the past week I have started to reflect on how differently I view investing compared to my 22 year old self. My 22 year old self definitely made some bad stock picks. Below are the top five ways that I have failed and learned as an investor in the past decade.

  • 1.) Avoiding Penny Stocks Unless You Got Time 

    • When I was just out of college and working my first job I was depositing around $50 a week into my private brokerage account and really tried to gamble it away. I noticed every week there was some random pump and dump penny stock that was shooting up 20-100% each week. OTC (or over-the-counter) are stocks that are valued under $5/share and don’t trade on regulated exchanges such as the Nasdaq or NYSE.

    • In my mind I thought that if I could get a 20% return each week with a penny stock and jump to the next one the following week with my total portfolio after one year I would have millions in the bank and could retire early! Young and dumb me… little did I realize each week these massive gainers took sharp swings within the matter of an hour and if you weren’t watching you would be quickly down 20% in a day.

    • On top of that each time I hit buy or sell TD Ameritrade charged me over $7 a trade which was almost $14 a week which really started to eat away at what I was contributing if I didn’t hit any big returns. The biggest thing I learned was that if I was going to play penny stocks I had to be glued to the charts and the screen and have a stop loss ready or click sell immediately which just isn’t viable with a normal job. Long story short don’t mess with pump and dumps unless you have all the time in the world (which most people don’t).

  • 2.) Having All My Investments in Retirement Based Accounts 

    • After failing at getting rich quick in the market I really dove into the Dave Ramsey world of index investing into my mid-20s by going all in on my retirement accounts. I focused solely on loading my 401k and my Roth IRA (shout out to my Mom for helping me set up a Roth IRA and educating me on it around my 18th birthday).

    • It felt great “playing it safe” and owning the entire market. I felt like I was building a really great base but for myself in my mid-20s in my retirement accounts but when I got into my later 20s I realized one thing… I COULDNT TOUCH THIS MONEY UNTIL I WAS 59.5 YEARS OLD 😱

    • This honestly made me feel hopeless at a young age thinking that I wouldn’t be able to enjoy the fruits of my labor for over 35 years. Even though I recommend contributing ~75% of your investments to retirement accounts for the tax advantages I still think it is important to allocate some of your investments into a brokerage account or what I like to call “Bridge Accounts”. Building up a couple of bridge accounts to have some liquidity going into your 30s and 40s will give you the freedom to have options. Liquid investments give you the ability for potential alternative investments later in life.

  • 3.) Investing Before Doing Homework 

    • When you first start investing usually you just pick hot company names or invest in what you consume. But the world for me really changed when I realized I knew absolutely nothing about what I was investing in other than popular stock in the news.

    • Making informed investment decisions really came along when I started to learn how to read a companies earnings report and understand what the reports mean over time for the share price of a company. By doing so I was able to make choices based on factual information in a company.

    • Before you invest in a single individual stock I challenge you to go and read through the companies past few earnings reports. Do you really understand what is financially happening at the company? How does their revenue growth, debt, net income growth, shareholder structure, insider selling and buying, and general financial metrics stack up against other companies in their industry?

  • 4.) Overthinking Companies Value 

    • Looking back if all we would have done was buy Apple, Amazon, Microsoft, Google, Monster Beverage, and the list goes on we would probably be pretty happy today. But a lot of times in the moment you think “ok there is no way this company is going to continue to grow like it is in the moment”.

    • I learned that when you identify a solid company that is building a moat or monopoly in their industry and is constantly innovating or growing don’t question it. A lot of times those will be the companies that succeed in the long run.

    • Take a look around you and think what companies today are making the best decisions to set themselves up differently from the competition in the future. What companies truly have great leaders who are founders and have a large stake in the company? How do they act and react to the ever changing dynamics in the world? I truly believe if you invest in companies that are building moats and have great leaders at the helm those are the companies you want to hold long term.

  • 5.) Neglecting Dividends 

    • When you are a young investor there is a large percentage of the investing population that recommends not investing in companies paying dividends because you won’t get the most growth out of your investments over time (which is somewhat true). However don’t ignore the dividend world.

    • I learned a long time ago to trust your gut and build some exposure to dividend income. Dividends are often overlooked and have been especially in the last 20 years of our tech bull rush. But they can significantly boost long-term returns through reinvestment, making them a powerful tool for wealth-building compared to growth stocks that rely solely on price appreciation.

    • My advice is to ignore the dividend haters out there. If you like a REIT or a blue chip stock that pays a dividend and you want to own it long term DO IT. Once you start building up some decent dividend income either every month or quarter it can really be a positive friend in your investing world when the markets are bearish and your positions are beaten up. Those little dividends when your portfolio value is dipping makes you feel like you have real ownership over the positions you own. Rather than those positions owning you.

I am curious to hear over the last decade what are some investing mistakes that you made and have reflected on in recent years? What do you do differently now compared to when you first started? What rules or processes have you created for yourself that benefit you? Ultimately at the end of the day everyone has to make their own decisions on where they park their surplus of cash. Don’t compare your wins and losses to everyone else. But make sure you are learning from your past mistakes or tendencies and do something about it going into the future.

The purpose of this newsletter is to encourage you and our other 81 Gazette subscribers to start and stay consistent with your personal, professional, and financial journey.

Thanks for investing your time reading this.

Disclaimer: Graham’s Gazette provides information and resources related to investing, financial topics, and personal growth for educational and entertainment purposes only. The content presented is not intended to be construed as financial advice. Readers are encouraged to conduct their own research and consult with qualified professionals before making any financial decisions. Graham’s Gazette and its creators do not assume any responsibility for the accuracy or completeness of the information provided nor do they guarantee any specific results from such use of information.