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April 14, 2021

How I Learned About Trading on the Stock Market

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I grew my wealth initially by taking over rundown businesses and fixing them up and building up the customer base and selling things at a profit.

For instance, my big moneymaker was catering events. I could charge thousands of dollars and provide food, the food part is actually very cheap. So the profit is in the service that you provide, solving a problem.

After I had built and sold a few businesses and then flipped a few houses, I started running out of money to buy houses. I started investing in houses over the longterm and building a property portfolio, and funnilyy enough, one of the women that worked for me had been a financial adviser. She used to teach people how to trade the stock market, and she said to me, "I think you'd really like trading the stock market. You're good at this whole retail thing, I think you'd really enjoy trading the market."

It kind of stuck with me, but I had no experience of it, other than floating a company on the stock market, nobody had ever taught me how to trade or buy and sell shares, and to be honest, I don't really trust brokers because I've had some bad experiences with stockbrokers. A lot of the people I knew from my days of floating the business on the stock market found that there were a lot of unethical people who are in the industry. So I just kind of thought one day I'd like to… then I was talking to my finance broker, the guy who was helping me get the loans for my houses, and he said, "Do you still have some shares in the company that you floated?" And I said, "Yes, I've got like about a million dollars worth of shares in this company."

And he said, "Well, do you know that you can borrow the equity out of the shares, just like you can borrow equity out of a house? And you can invest in other shares so that you don't have all your risk in one company." And I said, "Oh, well, that sounds really interesting." So he said, "Yes, it's called margin lending. Look into it." I started asking around and I found a financial advisor who could teach me how I could borrow against the shares that I owned, just like I would borrow against the equity in my homes, and I ended up arranging a loan with a company called ETRADE, which a lot of you might have heard of. I basically moved all of my shares into ETRADE, in my ETRADE account. I set up an online ETRADE account and now, of course, there are way more trading platforms than there were then.

But at the time that was one of the biggest trading platforms, and so I moved the management of my shares, which I guess is kind of like moving a domain from one hosting platform to another or moving your website from one hosting platform to another, or your bank loan from one bank to another.

I moved my shares into this ETRADE account, where I didn't need a broker to manage the shares. I could buy and sell them myself with an understanding of how to use this software. And then I organized with ETRADE to borrow against the value of these shares, and I still have a million dollar margin loan to this day that they loaned me all this credit that I could use to trade the stock market, even though I'm not actively trading right now. Anyway, what they did was they gave me this budget, but I didn't know anything about stock market trading.

And I didn't know who to ask to teach me. So I thought, well, what I'll do is I'll just take 10% of this borrowing and I will invest it across at least 10 shares. So I'll put like $100,000 into the stock market, $10,000 each into 10 different shares. And this is pretty much what I teach people to do with their business. It's like diversifying your risk, always be looking to how you can diversify your risk. And I started reading magazines that talk about investing. There are Money Magazine and Share Magazine and all these different magazines and I picked one up that had the top performing 200 shares of the year on the overall stock market. And of course, there are a few different platforms and indexes you can trade as well. So there's like the NASDAQ, which is all the tech stocks, and then there's the main one, which is the S&P, the Standard and Poor.

There are quite a few different portfolios of stocks that you can look at that you can choose to invest in. And this one was, I was trading in Australia, it was the top 200 shares on the Australian stock market or the ASX for that year. What I did was I started learning how to use E*TRADE, and I could look at charts, which was the share price movement charted over a period of time, and I could see which shares were volatile, meaning they go up and down in price a lot, or the ones that had had steady, regular growth. And because I'd been buying things at a discount and selling them later at a profit, I understood this whole concept of 'buy and hold' and look for things that are undervalued for various reasons. Like buying real estate when the market is down because of a turn in the economy and then holding onto it and selling it when the market's up.

For instance, when I was buying a lot of my real estate, I bought in a fast-growing area outside of the city that had just gotten a freeway. So I had a pretty good idea that the properties that I was buying had already started to boom, because of this new freeway into the city, and were going to keep going up in demand as people started moving out to that area of growth. And I had a pretty good chance of making a quick return on my property investments, which I did. It's the same sort of thing with the stock market. Like if there's a big downturn in the economy and there's a big fall in the stock market and you're in it for the long haul, and you could start investing across a portfolio of shares and just hold them and wait for the market to recover.

But I'm not saying go and do that. I'm saying it to understand market conditions. And obviously, I'm not licensed to teach people how to trade the stock market or invest, but this is what I did. I'm just sharing my experience of how I started investing in the stock market. And what I did was I made this list. I started with the top 100 shares on the list, and then I focused on companies that I understood their business. There was one in particular in Australia that made poker machines for people to gamble on … slot machines. They made slot machines. And I understood that that was a fast-growing business because the laws had changed and more venues could put poker machines in their lobbies and in their bars and so on. That was a growing industry and they were having quite a lot of growth, so I invested in that company.

Another one was the gas company, I understood the gas company as an overall business model, and I invested in that, I had this plan, I did this spreadsheet. I was going to invest $10,000 in this one, $10,000 in this one, and then I made a terrible mistake. I made a mistake on my spreadsheet and when I placed my first trade … I had a spreadsheet that told me how many to buy to get $10,000 in shares, like by the share price, and I think I did like a divide instead of times or something on my spreadsheet. And I placed my first trade on, I remember it was the gas company because it was A, AGL the top of my list. And I placed my whole $100,000 on the first share on the list, and I freaked out because it was like. "Oh no, I've spent my whole $100,000 pot on one share instead of 10 shares!"

And I watched it for a few days and because the stock market goes up and down on a daily basis… you don't actually take a loss or make a profit until you sell the shares. But you can watch the value going up and down every day by the price going up and down every day and what the market is trading at. And finally, and I didn't have anyone to talk to because I didn't want to tell anyone that I was teaching myself to trade the stock market because I thought everybody would tell me I was being a gambler and I was crazy. So finally, I reached out to the financial advisor that had helped me set up the margin loan, and I said, "What should I do? I've invested my whole a hundred thousand in this stock. And I've already lost like $5,000 in share value."

And he said, "Well, just sell. Take your $5,000 loss and reinvest in all the other shares like you were going to." So a bit the bullet and I did it, I sold the shares and got back down to $10,000 in that company, maybe I went down to like $8,000 to accommodate for the loss. And I fixed my spreadsheet and invested the rest of the now $95,000 in the basket of shares. But the lessons that it taught me were very, very valuable to me moving forward as a share trader, and that was that the wonderful thing about investing in the stock market, as opposed to say, investing in real estate or businesses is - if you've made a mistake, you can correct it and very, very quickly. You can get in and out really quickly. Whereas with houses, if you make a mistake and the market starts turning against you, you've got to sell the house, you've got to pay all the associated fees and the taxes and the commissions.

With the stock market, it's a very, very liquid investment. I learned a very, very valuable lesson. And that was, if you realize you've made a mistake, cut your losses, and that takes… that's a very, very important lesson. You don't just sit there and go, "Oh, no, no, no, no." Watch it go down and down. You've got to have discipline. You've got to learn how to take those losses and move on, keep that money flowing. So what ended up happening was I invested in these other shares and remember, I was telling you about the poker machine company. Well, they just exploded up in value, so although I'd lost like $5,000 on the gas company, with that initial week's worth of trading, and the gas company did continue to go up over time, like over the next year, I made money on that stock.

But Aristocrat, which was the gambling poker machine company, had a really good year. I made tens of thousands of dollars in profit because that share just kept doubling.

And then basically, what I would do was every couple of months I would review… Actually, every month, I was a bit paranoid about it because I was always learning it. But what I would do is I would review those shares every month. And I would say, are these on track? Are they continuing to grow? Or would I be better off just closing out this position and moving the money into a stock that is showing growth? And that's pretty much how I taught myself how to trade. And I ended up making… I started making millions of dollars a year by doing that by just continuously managing it, just like I teach you guys to manage your money. Well, if you're going to be a share trading investor, you also want to look at your shares as active investments that you have to keep an eye on every month and manage.

And you have to keep very, very accurate records because you're going to have to report all those profits and losses at the end of the year when you go to do your taxes. So that's kind of how I got into the stock market. And I actually loved trading. And I do plan on getting back into trading. I do crypto trading now, but if I was going to…and I do want to get back into the stock market trading, it's just that I found that I couldn't manage my online business, my education business, my publishing business, and property and look after my shares. I chose to stop doing too many things because you just have to recognize that you've got to focus on one thing at a time and get each thing working properly.

When you try to spread yourself too thin, that's when you get into trouble.

Written By Cydney O'Sullivan, Founder of Millionaires Training

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