Thursday, August 25, 2011

Lessons learned being an amateur investor

I am not particularly wealthy - not at all. I just have a bit of savings (rather modest, pension money and so on) that I try to safeguard for later. I started doing this about 12 years ago in 1999 - when stock markets were still euphoric. Needless to say, I 'invested' in stock and stock funds at my bank. Did I know... Today, I still have most of that stock, only it is worth a fraction of what I paid for it a decade ago.

That was when I learned a very important lesson: when investing, don't buy what everybody has been buying (and what therefore has been going up in price) because you are paying too much. Without exception, all my 'investments' today are still worth less than they used to be.

It does not end there: in the big crash early 2000s (bursting of the 'bubble') everybody with money pulled out in time (I didn't). Instead of stock, people started investing in real estate - at least where I live. Consequence: with everybody buying, prices of houses went up sky-high. You know, way too much demand. Today, houses are over-priced in Belgium (according to the IMF, and also according to my personal impression;-). My conclusion: now is a bad time to buy a house - at least in Belgium.

Then comes the current geopolitical situation. The dollar being unstable, the euro also. Inflation around the corner. Investors massively buying gold (and gold skyrocketing in price), smarter ones buying railway corporations (Warner Buffett).

Following my rule of thumb, what is left to put my savings into? Real estate? Don't think so - overpriced. Gold? Nope. Railways? Don't have those on the stock exchange here - and Belgian railways aren't really the smartest ones in their spending anyways;-)

So what is left? My careful conclusion is: the stock market again. Everybody is running away from it, so it could be time to move in. I spent most of the day researching undervalued stock on the Brussels exchange. Fingers crossed...

[Update: forgot to mention that obligations are not an option these days in Europe, and keeping money in the bank doesn't seem a good idea either with inflation lurking around the corner...]


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