Crush the Excuses Keeping You From Investing in the Stock Market

Crush the Excuses Keeping You From Investing in the Stock Market

Are you outside the stock market despite wanting to be in it?

Maybe you’re suffering from the very common disease called “bad excuses.”

Read this list of the five most common bad excuses and find out how to cure them.

Excuses grow like weeds in your mind, and you need to pull them out so they don’t strangle your budding courage.

It’s about pulling them up by the root as soon as you spot them.

How do you do that?

Bad excuses are just phrases and stories that we tell ourselves, so the easiest thing is to tell yourself a new story.

Here are five of the most common excuses – and the way to get over them:

1. “I can’t figure it out.”

Repeat after me: “I can do it.”

Another phrase you can say is, “I’ve never tried that before, so I can probably do it.” That’s a Pippi Longstocking quote, by the way.

This excuse is very common among women.  

I hope that by being public about my story, I can give other women courage to invest.

The good news is, you don’t have to be the strongest girl in the world like Pippi or possess any other superpowers or supernatural abilities. You don’t even need a particularly high IQ. And you definitely don’t have to be a man. The stock market doesn’t care about sex, color, race, IQ, or whether you have children or not.

This is really good news, because there is a level playing field.

You need a calm approach and a dose of patience to make it work for you.

Just remember, there are a lot of people who want investing to look complicated because they have an interest in you believing it’s difficult.

The entire financial sector would like to sell you their products.

When you think it is difficult and complicated, it’s easier for them to sell you some expensive products.

2. “I’m too old / it’s too late.”

Instead, tell yourself:  “I have the right age and experience to start investing.”

It’s never too late. Never.

There was a German lady who started investing in stocks at an advanced age (after she turned 60). She became rich by value investing, and she also became famous (in Germany) for her strategy when she was in her 70s. You can try searching for her. Her name is Beate Sander, and she is referred to as “Börsenexpertin” and “Millionärin.”

And by the way, Warren Buffett and his partner Charlie Munger are both over 90, and they’re still very active investors.

3: “I’m too young and too inexperienced.”

Say: “This is the best time for me to start investing. I’ll learn and grow.”

I invest my 5- and 8-year-old boys’ savings. I tell them what they own so that they can learn from it. They’re already learning little by little about value investing.

If you’re reading this blog, you are definitely older than my kids.

I always get so excited when very young people contact me. I think about how much their money can grow. If you’re young, you can really take advantage of the effect of compounding.

Even a little bit of savings can turn into a fortune if you have the time and patience.

The excuse of being too young is probably also related to the perception that you first have to spend all your money on studies, homes, weddings, and future children before you invest.

But this is not an either-or decision. You can invest 100 dollars a month as your life develops and you study, get married, and have children. No, I’m not going to mention any cafe lattes. You can have your coffee. You’ll figure out where you want to save – or grow your income.

4: “I don’t know which platform I should use.”

Repeat after me: “Money loves speed, and I make quick decisions about small things.”

Just pick a platform.

You can open accounts and deposits in as many banks as you want, and it’s not like you’re forced to pick only one and stick with that.

Why not just start with your own bank and get some investing experience there? You can always open another account somewhere else.

In the vast majority of cases, the fees will not mean much because as a value investor you don’t trade that often.

Each platform has introductory videos that can get you started, but to be completely honest, I’ve never watched any of them myself. Most platforms are as intuitive as online banking.

If you are afraid of pressing the wrong button and losing a lot of money in a mysterious black hole on the platform, start with a small amount and give it a try. You’ll be more comfortable with the experience.

5: “It’s too risky.”

Repeat after me: “I seek knowledge and invest with a solid strategy.”

The truth is that you learn and build knowledge, and that makes it less risky.

It’s only risky to invest if you don’t learn along the way how to select companies or funds, or if you don’t do some basic research about what you’re buying stocks in.

Unfortunately, most private investors pick stocks at random.

Many beginners buy shares in a company because they heard it mentioned in a podcast or because someone brought it up at a dinner party. Dude, that’s not research.

But not you, because you read this blog post every week (right?).

You’re already smarter than most private investors out there.

Obviously, you’ll research before investing, and you know what to look for because you’ve read my e-book Free Yourself, which you can download right here.

How to Set Up Your Investing Practice

How to Set Up Your Investing Practice

I once read a blog post that changed my life.

It was about running and maintaining the new exercise habit.

According to the blogger, all you had to do was put on the running shoes first thing in the morning.

In fact, he said you should sleep with the running shoes right next to your bed.

That was the key to your success as a runner.

Just that. So simple.

Now you’re probably wondering what this has to do with investing?

I’ll get to that. First, I just need to explain what’s so important about that simple piece of advice.

When we have to implement and maintain habits, it’s rarely the main action itself that’s difficult. It’s often all the preparation stuff around it.

It can seem so overwhelming to get stuff done. But often it really just requires five seconds of bravery. Which is the time it takes to get those running shoes on.

In other words, the biggest obstacle is getting the running gear on. Once it’s on, it’s so simple to run a few steps. Once you’ve run some steps, you might as well run a bit longer.

You won’t run if you’re wearing stilettos or Italian leather shoes.

If you want to run, you need to place those running shoes in a strategic location so it becomes a habit for you to choose them in the morning.

That’s all you have to do.

When I read this, it dawned on me that this piece of advice can be applied to almost everything else in life.

I implemented it in my eating habits. I had decided I wanted to drink fresh veggie juice every morning.

It was usually never a problem to drink the juice. It tasted good.

The biggest obstacle was getting the juicer ready and peeling the vegetables.

Sometimes small changes can make the difference.

For me, it made a big difference that I – after reading about running shoes by the bed – chose to place the juicer in a central place in the kitchen, where it was more accessible and ready to be used.

Now we come to the part about investing.

The point here is that you need to place whatever stuff you need to do your investment practice in a central location in your life.

So what are “running shoes” equivalent to in the investing world? It’s the space where you do your research and do the actual trading.

You need to prioritize creating a specific space where you can do the work.

If you always have that space set up, there is a greater chance that you’ll get it done.

In this blog post, I’ll give you my five tips to creating that space – even if you can’t set up a home office.

1. Create a Permanent Place in Your Home or Office

In the ideal world, you would have an office where you could research companies and read news.

Having a nice office with all the material you need to read and think and trade is a bit like having the juicer standing on the counter so you get right to it.

But a lot of people don’t have enough space for a home office.

You can still create a place that you know is your designated investing space.

If you’re going to sit at the dining table, choose a place other than the one where you usually eat. In this way, you can physically feel what role you’re entering when you sit down. 

I did that for years.

I would eat on one side of the table where I was facing my kids and had my back to the kitchen.

When the kids were asleep, I would clear the table and sit on the other side of the table, where I was physically a bit removed from entering the kitchen. I was now in my investing and working “seat.”

I would advise you to have your investing stuff ready in a box so you can quickly pull it out and set it up. That’s the next best thing to having an office.

2. Keep Your Investing Space Tidy and Clean

Clutter is unmade decisions.

Clutter can be things you haven’t decided whether to act on, like an invitation. Or it can be things that you don’t really know where they go. That’s also unmade decision because you haven’t decided where it should be, and it ends up being moved from one table to another.

If you surround yourself with a lot of tiny unmade decisions when you have to make big decisions, you will have a hard time focusing on what’s essential.

3. Make Sure It’s Comfortable

Yes, it sounds simple, but many people forget about the details.

You need to make sure that it’s physically comfortable to sit there.

Are your feet grounded? Do you sit up straight in the chair? Is the table the right height? How does it feel to sit down? Do you feel joy in your body, or do you prefer to avoid sitting there?

What are you looking at? A wall? Or a view?

If possible, position yourself so that you’re looking at something nice. You should either face a window or look into some kind of space. Never position yourself facing a wall.

If you’re sitting at a seat at the dining table, you want to invest in a proper office chair instead of a dining chair with a hard seat.

The little things can make a big difference in the long run.

4. Think About What You Need and How You Move

I once asked my maid where she wanted some hooks to be placed. It was fascinating observing her make the decision.

I watched her mime the movements she did when doing dishes and cleaning before she responded. She tried several spots and shook her head before choosing the right one.

She wanted the hooks exactly where she would naturally stand when she needed to use a tea towel or a rag or some oven mitts.

If there is something you need to use often, e.g., a notebook, a pen, a calculator, or some investment books, make sure it’s within reach.

It’s annoying to have to look for things or get up to get them when you’re in the flow.

5. Place Something That Inspires You In Front of You

Yoga and meditation schools often have a picture of a distant guru in India hanging on the wall.

Why? Because it’s inspiring and motivating.

It reminds them of the philosophy behind the movements they make.

You want to find something similar. Choose something that makes sense to you.

What should that be?

Ask yourself: Why do you invest? Who or what motivates you? What got you started?

Some might want a “guru” like Warren Buffett or Charlie Munger framed on the wall.

For me, my children are my biggest inspiration. I want to be bigger, better, stronger, kinder, and wealthier for them.

I like placing either a picture of them or a drawing made by them within view.

Currently, I have framed a drawing that my oldest son made when he was around two. It’s a peculiar drawing of me, and it reminds me that my kids are always observing me, and that they’re constantly judging the whole world based on what they see me doing.

That’s one important reason for doing “the right thing”.

The right thing in this context is to invest conscientiously, long-term, and with calm and patience.

What values ​​would you like to implement in your investments? Who or what inspires you to be that person?

In my e-book Free Yourself you can learn about investing in the stock market the way Warren Buffett does it. You can download it here.

How Do You Make a Living From Stocks?

How Do You Make a Living From Stocks?

How do you actually make a living from stocks?

What are the specific steps? Do you sell the shares?

This is a question many people ask me.

The underlying question here is also: what comprises a return on a stock? Is it just the rise in the stock price?

In this blog post, I will explain the three things that can make up your return.

I’ll also explain how I generate an income so I can pay the bills.

What Makes up a Financial Return from the Stock Market? 

Let’s begin with a definition.

According to Investopedia, a financial return is “the money made or lost on an investment over some period of time.”

Let’s break that down. How can you make money on a stock?

Here are the three factors:

1. Increase in The Stock Price

A financial return on a stock can be an increase in the stock’s market price.

This is probably what most people associate with the word “return” when it comes to stocks.

To make a living this way, you will have to sell, and this will of course reduce your remaining number of shares.

Hopefully, the remaining shares are worth so much more than when you first invested that your total wealth grows even if you sell a small portion of that portfolio.

2. Dividends

When a company makes a profit, they can choose to pay part of the profit to the owners.

As a shareholder, you are one of the owners.

When companies pay out a portion of the profits, that is called a dividend.

The dividend goes into your investment account without you having to sell the paper.

Sounds cool, doesn’t it? You don’t have to sell. You can just lean back and enjoy the ride. 

Then why not just focus on companies that pay a lot in dividends?

There are, in fact, major disadvantages to actively pursuing the so-called dividend kings.

Companies that are growing and have a large market potential ahead of them are too busy reinvesting the profits in new markets, new employees, innovation, and acquisitions. They don’t pay dividends, because that would mean missing out on great growth opportunities in the market.

The major dividend stocks typically consist of very mature companies like the Coca-Colas and Johnson & Johnsons of the world.

If you only invest in the dividend kings, you’ll miss out on great growth opportunities, and your overall return will falter.

The other disadvantage of dividends is that you have to pay tax on them. This handicaps the effect of compounding.

You can read more about the advantages and disadvantages to dividend stocks in this blog post.

3. Share Buybacks

Share buybacks are an alternative to paying dividends.

Instead of giving the money directly to the shareholders, the company may choose to use some of the profit on buying back some of their own shares.

This will cause the price of the stock to rise in the long run, because the cake (the company) will be divided into fewer slices (shares). When the cake is cut into fewer slices, each slice is worth more.

Your piece of the cake, your shares, will therefore be worth more over time if the company makes regular share buybacks.

Warren Buffett loves stock buybacks, and his company Berkshire Hathaway regularly buys back shares.

So what are the benefits of buying shares back in terms of dividends? Why is Warren Buffett so happy about it?

It’s simple.

When you receive dividends, you must pay tax on that amount. You don’t have to pay taxes when the company repurchases stocks (provided, of course, that you don’t sell the share).

This means that share buybacks don’t cripple the effect of compounding. The money can continue to grow exponentially.

But to take advantage of this, you will of course have to sell the stock at some point, and then we’re back to square 1.

You can read more about share buybacks in my blog post here.

How Do I Make a Living From Stocks?

A lot of people ask me how I do it.

Do I sell shares in order to pay the rent? Or do I pick dividend stocks?

The answer is that I do something completely different.

I do a particular kind of options trade that creates an income flow.

I follow the principles of value investing when doing these trades. I look for undervalued companies and analyze them.

The great advantage of my method is that I can live off my shares without having to sell them.

It doesn’t hurt my portfolio and doesn’t set up barriers for compound interest rates.

This is the secret method that I don’t usually talk about in my blog posts because people can get it horribly wrong if they do it uninformed.

Where did I get the inspiration for this method? From Warren Buffett himself.

It’s a public secret that Warren Buffett is one of the biggest stock options traders in the world.

Why is it a secret?

Because he doesn’t talk about options.

One thing is what Warren Buffett does and another is what he recommends his followers do.

He tells his followers to invest in an index fund. But that is pretty far from his own value investing and stock picking style.

Why does Warren Buffett never talk about his options trades?

I believe it’s for the same reason I avoid it.

I’m afraid people will google “options” and do it wrong and lose a lot of money on it. You have to know what you’re doing if you move into options – or you might put a lot of money at risk.

There is only one place where I talk about options, and that is in my courses.

I’ve been teaching this stuff for years in Danish, and more than 150 people have attended my 8-12 week long courses.

This fall I will launch my first course in English.

Make sure you’re on my email list if you want to be invited to my next webinar where I tell you about my upcoming online value investing courses. If you download my e-book, you can say yes to receiving emails.  

Five Reasons to Become Financially Independent

Five Reasons to Become Financially Independent

 

Why even bother?

Why postpone your spending so you can invest and have more money for spending in the future?

What if you’re happy with your life and your job as it is?

I’ll tell you why.

It’s my firm conviction that everybody should invest purposefully to become financially free.

Everybody.

Including the person with a great career. 

Including the person who feels safe because her partner is providing for her.

Including the person who feels like the future is golden.

Why?

It’s called prevention.

It’s like eating fresh vegetables and working out even though you aren’t sick now.

It’s one of the steps in creating a wonderful life.

Here are five specific reasons why you should invest in stocks now in order to become free later:

Reason No. 1: Avoiding Adding a Crisis to a Crisis

Your life will take its own turns.

Surprises are part of life.

It could be sickness, a divorce, a dismissal, a global pandemic, or a sudden death in the family.

Yeah, we don’t really want to talk about that, and that’s why most people avoid planning for disasters like these.

It’s like facing the pictures of the starving children in Yemen. It makes you feel uncomfortable, and instinctively you want to scroll on.

Yes, it’s unpleasant thinking about how something can disrupt the path you’re on.

But that’s the nature of life.

We’ll be surprised, challenged, and we’ll overcome.

But we have to get through the difficulties, and that’s why you need to do some preventive work.

You need to make sure that a crisis doesn’t become bigger than it should be.

If you’re going through a divorce worrying about money, you’re adding one crisis on top of another crisis.

If you get laid off and worry about your finances, you’re adding one crisis on top of another.

If you get sick and have to worry about being able to keep your job while trying to recover, you’re adding one crisis on top of another – making it more difficult to focus on healing.

Being financially free will make you stronger in life and better equipped to handle the challenges life throws at you.

Reason No. 2: Being Able to Choose From the Top Shelf

When you are financially independent, you have more freedom to build the life of your dreams.

I don’t mean just material stuff like adding another designer bag to your wardrobe.

I’m talking about the big decisions in life and the experiences you can have:

Like resigning impromptu if your boss is pestering you.

Like taking a year off to travel around the globe.

Like deciding to have a child without having to google the cost of daycare.

Like exploring a hobby, even if it’s a bit extravagant.

Like pursuing an infatuation even if the person lives in another state or country.

Those kinds of choices. The truly important choices.

Reason No. 3: Being Able to Spend Time With Your Loved Ones

If you’re dependent on a salary, there will be situations where you’ll be at your desk wishing you were with your family instead.

Maybe your family is gathering for a celebration, and you can’t be there because work is calling.

It can be something negative you need to handle, but can’t.

When my mother died, I was spending most of my time at work.

The doctors turned off the machines that were feeding her because they said it was her wish. She had had a stroke, was unable to move much, but was conscious. We knew she only had a week left. She was dying slowly in a hospital bed.

Most of that week, I was at work. I came after work when I could.

It’s a week I can never have back.

Reason No. 4: To Prevent Stress

You’re more inclined to get stressed if you worry about your finances.

That’s a fact.

If you know that you can always provide for yourself and your family no matter what happens, it’s easier to shrug when things don’t go your way.

It won’t bother you as much if your boss is giving you a hard time.

Sometimes small things become huge when something else is worrying you.

Parents who don’t feel safe financially have all blurted out stuff at their children like “Money doesn’t grow on trees” or “Are you insane? Do you know what that costs?”

That stops when you know with certainty that there is always enough money for you.

Isn’t that a wonderful thought?

Try saying it out loud: “There is always enough money for me/us.”

How does that feel?

Reason No. 5: Being Able to Provide for Your Family for Generations

Investing in stocks isn’t only about you.

It’s about your family. It’s about all the people you care about and the ones who haven’t been born yet.

You’re building wealth, and while you’re doing that, you’re building their future too.

You can do that in several ways.

You’re your children’s most important role model. If they see and hear you talk about investing, there is a higher likelihood that they’ll be responsible with their money too.

The other way is to invest for them.

I’ve opened savings accounts and retirement accounts for my two boys, and I actively invest the money on their behalf.

My boys are still small and there’s plenty of runway to make a modest amount of money become millions.

Their savings can really grow, and it will have a big impact on how their lives unfold.

Now what?

Are you ready to invest in stocks?

Are you ready to take charge and steer your finances towards freedom and wealth?

Sounds good.

Now you need more information about how to do it.

Your first step is to browse around the blog and read the free e-book I’ve written for you.

Next is to attend a webinar.

If you download the e-book, you’ll get on the e-mail list, and I’ll let you know when I do another webinar.

Make sure to download the e-book Free Yourself right here

 

 

 

Ten Reasons You Stop Yourself From Investing in Stocks

Ten Reasons You Stop Yourself From Investing in Stocks

You’ll find them all over, but you don’t notice them.

Who?

The people who want to invest in stocks but never do.

They’ll read business news, hang out in Facebook groups about stock market investing, and some of them might even read this blog post. They’ll do anything to make their money grow.

Expect one thing.

Actually invest.

Wanting to invest but not doing it is a pretty common ailment.

They’re like the person with tons of cookbooks on the shelves but with takeout food on the dinner table.

They’re like the person who loves watching do-it-yourself programs about people who built entire houses with their bare hands, but who never get around to fixing that handle on the bathroom door.

What’s actually stopping them?

There are ten reasons why people stop themselves from investing.

If you haven’t invested yet and want to, do you recognize yourself in any of these ten points?

1. They Don’t Understand the Value of Time

Richard Branson says that any successful entrepreneur knows that time is more valuable than money.

When you invest, time makes a big difference.

The sooner you get your money invested, the sooner it will grow exponentially.

Here’s an example.

Let’s say you invest $5,000 for a child’s retirement. You get an average return of 15 percent for 60 years. How much does it turn into?

Hold on to your chair. It turns into $19 million.

Let’s say you wait until you have $500,000 and invest with an average return of 15 percent for 10 years.

How much does it turn into?

It turns into 2 million.

In other words, get at it.

2. They Make It Too Complicated

They think it’s super complicated to invest, and they believe they have to read half a library before even signing up for an investment course.

Maybe they even have the idea that it will ALWAYS be too difficult. They might make excuses to themselves like not being good at math, not being good with money, not having the right mindset.

3. They Procrastinate

They know they have a tendency to put things off, and somehow they are almost proud of it.

They tell themselves that it’s just who they are.

It becomes their excuse for not getting it done.

The real reason they hide behind a shield of procrastination is that they think investing is dangerous and overwhelming, and that’s the real reason they push it off.

4. They’re Afraid of Making a Mistake

What if they fail? What would people think of them? How would that feel?

The human mind is actually more motivated by avoiding pain than by gaining something new.

These people spend time thinking of all the negative consequences.

But if you don’t begin, you really fail. Remember that.

5. They Don’t Live According to Their Values

Either they aren’t aware of their values, or they just don’t live according to them.

They might want financial freedom and a feeling of peace and security, but they don’t take action to get it.

They’re like the person who worries about the environment but who keeps eating huge steaks and driving to work in a big diesel car.

If you want financial freedom, but you don’t invest to make your money grow, you’re not living out your values.

6. They Try to Time the Market

They think the stock market is too expensive and wait for it to dive.

The problem with that is that none of us knows when that will happen. Not even Warren Buffett can time the market.

When the correction comes, they still hesitate, because they fear that it will dive even more, and they still don’t invest.

They miss the opportunity. Every day. 

7. They Fear Getting Rich or Too Successful

Sounds unlikely?

Well, take into consideration that this isn’t a very conscious point. It’s a subconscious fear of what your family, friends, and neighbors might think if you “have too much”.

A lot of us have been told that we were “greedy”, “selfish” or simply just “too much” when we were children.

I grew up around left-wing politicians, and as an adult who took up an interest in investing, I was always afraid of being called “a capitalist”.

When it finally happened, it felt like a relief. It wasn’t that bad.

Yes, there will be people who will think badly of what you do and who you are, but it’s better to get them out of the way early on, so they don’t hold you back any more.

Shrug and move on.

Be honest about what you do and who you are.

8. They Want to Be Rescued

This is also a subconscious mechanism.

None of us would be proud of having an almost childish need of being seen and being “saved”.

It might be the woman who wants a man to take care of her.

Or it might be a man who wants mom and dad to show their love by helping him financially.

It can also be the person who plays the lottery and daydreams of a big win.

9. They Lack a Strategy

They think that buying shares is just buying, and they don’t have a strategy or a plan.

This reminds me of myself as a teenager when I tried to make my first meal.

I went to the store to look around and buy something on the fly and “just” cook it. 

I bought chicken hearts and cream.

The plan? There was no plan, I just remembered that eating the heart of the chicken was my favorite part of the chicken as a child (yes, the chicken came with all the parts). My second favorite thing was a cream-based sauce.

I went home, fried the chicken in a pan and put cream on top.

Let me tell you, chicken hearts in cream is a nasty dish. I still get nauseous just thinking about that meal.

For years after that, I told myself that I simply wasn’t good at cooking. As if my destiny was determined by that one experience.

How would my first cooking experience have turned out if I had found a recipe, made a shopping list from that, and simply followed the recipe?

You can do the same with investing. You can follow a simple recipe so you know what to put in your cart.

10. They Think They Have To Figure it Out Alone Without Help

They think they have to do it all alone at the kitchen table without getting any help. 

They don’t even know that they can get help.

Think of something you have learned and mastered in life. How did you learn?

I learned to read and write in school. I learned to knit with the help of an older relative. I learned to drive by taking driving classes. I learned to swim by taking swimming lessons, and I have even taken some as an adult to get better.

How come many of us expect to figure the money stuff out at the dining room table at night?

What To Do If This Is You

If you recognize yourself in any of these points, congratulate yourself.

You have just become aware, and now you can do something to change it. If you hadn’t become aware, you would have continued on the same path.

The first step is to get some knowledge.

I have condensed my 20 years of experience as an investor and financial journalist into my e-book, which you can download here.

Once you are on the email list, you’ll get a weekly tip or blog post to keep you on track.

You can join the investing community I’ve created on Facebook right here. You are no longer alone. 

Don’t forget to read my free e-book that explains my whole investing process. You can get it here.

 

 

 

The 10 Most Important Characteristics of the YOLO Investor

The 10 Most Important Characteristics of the YOLO Investor

Phillip, a first-year student, was just 21 years old and still living with Mom when he bought his first shares.

His mother, who had taken several investing courses, had been trying to get him interested in investing for the last five years.

Initially, she was happy to see him invest in stocks. When Philip asked if he could borrow $5,000 to invest, she immediately said yes – no questions asked.

She later regretted it when she discovered he’d placed all the money in one stock: GameStop.

“I know I can lose all the money, but I’ll probably get it out before then. Besides, if I lose the money, I lose the money,” he told Mom when asked.

His interest in investing picked up during the first lockdown when both classes and his birthday party were cancelled. He spent most of his time reading the news and chatting on social media while doodling at the kitchen table in his mother’s apartment. Stocks hit the news with a plunge and a quick rebound.

He saw the V-drop shape and thought something like, ‘Hey, maybe stocks aren’t as boring as I thought. Mom’s onto something.’

That’s when he began investing.

First, it was a way to make a few quick bucks. Then he discovered there was a big community online of people just like him. He also realized that he got a kick out of it when he made some quick gains.

How did things turn out for Philip’s GameStop investment? We’ll never know, because Philip is a composite character of several people I’ve talked to.

Maybe he sold before the stock imploded. Maybe he lost most of it.

Philip is a YOLO investor (You Only Live Once), and people like him are getting a lot of attention in the stock market news these days.

It’s even a verb. You can YOLO in the stock market. These YOLOing YOLOers can influence how the market will develop in the future.

The fact is, there have rarely been as many private investors in the stock market as there are right now.

Private individuals now account for almost as much of the volume of the US stock market as institutional investors such as pension companies and mutual funds, according to numbers from Bloomberg published in this Financial Times article (sorry paywall).

Not only are private individuals flocking to the stock market, but this new investor, the YOLO, has emerged, and they’re not behaving like the rest.

YOLO investors arrived with the pandemic.

Like Philip, they were tied to a screen at home during lockdown, and many of them have gained access to a bag of money they did not have before, like the US stimulus check or other corona-related subsidies.

What else do we know about these YOLO investors?

1. They Gamble

The YOLOs invest short-term and aim to make their money multiply in a few days or weeks.

They approach the stock market as if it were a one-armed bandit, betting on hitting the jackpot. They go for profitable long shots, not incremental gains.

Saving for retirement is more distant to them than a space station.

They invest as if there’s no tomorrow – that’s the whole idea of you only live once.

2.  They Invest Borrowed Money

They use margin on the account, they borrow money from various sources (like “mom”), and they use leveraged products.

They’re simply not at all afraid of losing borrowed money. 

3. They’re Poorer

They have less money than previous generations of private investors.

How much do they have?

Typically between $1,000 – $5,000 in savings, according to the article from FT – and many have no savings at all. If they don’t have savings, they’ll borrow the money.

By comparison, the typical private investor during the dotcom bubble had about $50,000 to invest.

4. They Are Younger

They’re in their early 30s – and often much younger.

Compare that to the generation of private investors who invested in the dotcom bubble. They were about 50 at the time (so around 70 now).

The YOLO investors are so young that they were still playing with their LEGOs when the financial crisis raged. A serious stock market crash belongs to the dusty history books.

Which might be one of the reasons they don’t seem to fear a crash.

A 12-year-old bull market is an eternity if you’re in your 30s or younger.

5. They Use Social Media to Make Investment Decisions

They’re more likely to trust a stranger on social media than a financial expert on TV.

They grew up with social media, and social media is where they socialize and develop their worldview.

They’ll discuss stocks and private details about their financial position with strangers online, no problem.

They aren’t afraid of writing something like:

“I have $10,000… What should I invest in if I want the money doubled in a year?”

What’s astonishing about them is that they’re likely to do whatever a stranger with an alias tells them to do.

6. They Invest with an Activist Mindset

They invest in Tesla because they want less air pollution.

They invest in Beyond Meat because they cheer for Greta Thunberg.

They invest in GameStop to drive hedge funds out of their short positions.

They invest in cannabis stocks because they want cannabis products.

They invest in bitcoin to defy the government monetary policy (the eternal printing).

They invest because they want their money to make something happen in the world.

7. They Love All Tech

Their favorites are fintech, biotech, blockchain, all crypto, gaming, and Tesla.

They admire Catherine Wood from Ark Invest and the SPAC king Chamath Palihapitiya – they might even have one of them on a poster or a coffee mug.

8. They Use Commission-free Stock Trading Apps

They trade through commission-free apps on the fly.

They don’t need to sit themselves down in an office chair at a big desk with a steaming cup of coffee and a pair of reading glasses to enter a stock.

They grew up playing with a smartphone while eating cereal, and they’ll happily trade stocks on an app while taking the subway or chatting with a friend (or a stranger online). 

9. They Love Fractional Shares

On a platform like Robinhood, it’s possible to buy so-called fractional shares, which is a small part of a stock.

They love this stuff, because they don’t always have enough money to buy the whole thing.

For example, most of them don’t have $3,000 for a share in Amazon or $2,000 to buy a stake in Google.

10. They Don’t Care About Compounding

They invest now to get money now. They’re in it for the instant gratification.

Investing to get solid in retirement doesn’t rhyme with you only live once.

How will YOLO Investors Affect Your Stocks Going Forward?

When a large group of shareholders enters the stock market and when they behave atypically, it can affect the entire market.

Since “YOLOing” is a new phenomenon, none of us know exactly how they’ll behave going forward – they’re really a bit of a joker in this stock market game.

But here’s my best bet on what they’ll mean for you and your stocks:

A. Greater volatility.

When YOLO investors jump on a stock like a swarm of grasshoppers, the stock price could potentially rise to astronomical levels and implode afterwards, as we saw with GameStop.

B. More uncertainty.

We don’t know how they’ll react to certain events. They aren’t investing in their retirement funds, and they don’t think long term, so certain events might trigger them. These could be:

  • Taxes: What happens when they realize they have to pay taxes on their gains for 2020? Are they even aware? As they don’t have a lot of excess cash, tax liabilities in the spring might cause shares to plunge if they have to sell shares to afford paying them.
  • A correction: How will they react to a correction? Will they panic? Or stay cool? The fact that they have no experience with the financial crisis might mean they’re in for a surprise. On the other hand, many YOLOers began investing after that V-shaped plunge during the first lockdown – this might suggest that they aren’t afraid of stock volatility. However, they weren’t there for the steep plunge. They came in with the reversal and only enjoyed the ride up.
  • Reopening: What happens when all the covid restrictions disappear? They entered the market pushed partly by boredom. Will they sell all their shares and fly to Bali when the world reopens?

What should you do?

Now, more than ever, it’s really important to check the facts and the numbers on a company before you invest.

When volatility and herd mentality come into play, it’s vital to make sure there’s a connection between price (stock price) and value (value inside the company).

You have to go through a checklist (you can download mine here) and do some basic calculations.

My favorite way to check what a company is worth is using Warren Buffett’s owner earnings calculation, which you can learn about in my e-book right here.

Don’t forget to read my free e-book that explains my whole investing process – including my favorite way to calculate what a company is worth. You can get it here.