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  • Writer's pictureIshfaaq Peerally

How I make money?

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."

- Warren Buffett

Do your homeworks

About a year ago, I was entering the world of investing. Actually, the story begins a little earlier. When I was a 13 year old schoolboy I was introduced to the idea of investing in economics class. The thought of being able to own a part of a big company and being able to make profits out of it appealed to me. And I would often look at the stock prices in the newspapers and see in which directions they were moving. But I did not really understand what affected these prices until I became more interested in economics.

The first thought of investing came to me after the collapse of the Russian Ruble following the oil crash. Despite the growing inflation, I noticed that my purchasing power was increasing. It was because my savings were in Mauritian Rupees. I knew that the crisis would not last forever, so I decided to open a bank account in Russia to save my money in Rubles(with a high interest for later use). I will call this my first investment. I invested in Russian Rubles. But saving is not real investing. I wanted to go a step further. I began studying the Russian market. Could I take advantage of this crisis? Maybe invest in oil companies(because oil was recovering). I did a lot of research. I also studied the Mauritian market and US markets. I was reading books on investing. Watching courses on economics, on accounting,... And devised an investing strategy. I went to see a broker and he told me that I needed to be a resident of The Russian Federation to invest in the Russian market. Another broker told me that I could invest but I needed a minimum of 10000 USD (which I didn't have back then). But I didn't give up. I remember seeing an ad about eToro when I was doing my research(eToro is an online trading platform which allows users to copy each other). In a few clicks, sending some documents for verification, and with some deposit, my account on eToro was finally created on the 16th of March 2016. A few days later, my account was verified and eToro called me just to make sure that I understood how their system works. I also attended a webinar.

Now let's get to the actual investing. On the first day, I made a profit of 24 USD for an investment of 100 USD. That looks really good. But I was using a high leverage and that day I invested in oil which was very volatile at the time. The following day, I lost 53 USD. And during the following weeks, I lost hundreds of dollars. And I made hundreds of dollars with Tesla over the announcement of the new model. So I kept investing in Tesla until the price fell and I lost money again. In short, in two weeks, I made a loss of 18%. Yes, I was losing money but I was losing something more valuable, time. I used to stare at the computer screen waiting for an opportunity to buy or sell something. The most attractive stocks to buy were the ones which were volatile. I knew that I was not doing the right thing. My holding period went from a few hours to a few days, I was using less and less leverage but I was still losing money and time. And the fees were eating my profits. I eventually found a strategy which suited me, value investing.

If you need to learn an art then you need to learn it from the giants of this art. And who is better than Warren Buffett at the art of investing? And Buffett learnt from a giant, Benjamin Graham. I started reading Graham's book "The Intelligent Investor". I studied other great investors such as George Soros and Peter Lynch. And I found my own strategy which I began implementing and I started making profits. I stopped using leverages, my holding period was forever, I was only spending about 30 minutes per day on the stock market. 30 minutes of homework per day. The actual act of investing was not that important, what really mattered was doing the research. I was looking for the stocks, researching the fundamentals, comparing them, until I found a good enough reason to buy. I was no longer trading but truly investing. My fees became negligible and I started collecting dividends instead. All were going on well until September. I wanted to make some quick money and devised a very risky strategy which I was going to try in parallel to my main strategy but it failed. And I stopped it after a few days.

For the time being, I am still using the strategy which I had adopted last April. However, I have greatly diversified my portfolio. I bought stocks not only in the New York market but also in London, Frankfurt, Milan and Madrid. I also invested in ETFs, precious metals and cryptocurrencies. And I keep looking at the performance of my current stocks and always look for new ones. I have learnt a lot during the past year. I have made mistakes. I still have regrets. I am still learning. If I don't count the months of March and September, I've made 17 cents over each dollar invested during the last twelve months (I'll be honest, if you count these months then I've made a loss of 18%, but I'm not repeating these mistakes again) I know that we are in a bull market, and the Trump rally has really helped my portfolio grow. But the real test will be during the next bear market and recession. If I'm still proud of my investments after the next recession then I'll call myself a good investor. For the time being, I'll just say that I'm trying to be a good one.

PS: I have put the link to eToro if anyone wants to join or view my portfolio. Or you can just copy me ;) My eToro profile

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