3 Painful (but Important) Stock Trading Lessons I’ve Learned

James Ryan Jonas

Apparently, I’ve been doing stock investing for more than 15 years now!

Back then, I was searching the internet for income opportunities. Yes, I was a salaried employee then earning a relatively decent amount, but I still was not convinced that I can retire comfortably given that level of income.

I wanted a faster way to make my money grow, and that’s how I discovered stock trading!

Looking back, the past 15 years have surely been a rollercoaster ride.

A few years ago, I made 200-300% return from my then (and still) favorite stocks SM Prime Holdings (SMPH) and Megaworld Corp. (MEG).

I lost huge money from the speculative stock Agri-Nurture Inc. (ANI) and also — surprisingly! — lost 60% of my investment in one of the supposedly blue chip stocks, PLDT (TEL)!

There certainly were a lot of delightful, depressing, and awful stories in between, but I never regretted the experience and, at the moment, I look forward to the next 15 years of stock trading.

Given the experience, I’d like to share three (3) stock market lessons I’ve learned the hard way which I use as my trading and investing guide right now.

These 3 lessons best summarize my stock market experiences in the past 15 years. And I hope you also learn from these lessons!

Lesson #1: Stock trading gains are not guaranteed

Prior to 2008, making money was easy since the Philippine stock market was experiencing a bull run. But in 2008, the global economic recession kicked in due to the subprime mortgage mess in the U.S. I wasn’t trained yet back then to sell at a loss and so I decided to hold on to my losing investments.

The consequence: I lost 40% of my entire investment in just one year.

How long did it take me to recover those losses? Three (3) years.

Main lesson: stock investments could result in a huge loss. Stock prices will not always go up, and even if stock prices are already declining, they may continue to reach the bottom.

(What I usually tell newbie investors is that, the stock price may be 10 cents right now, yes, that’s cheap, but what prevents it from falling further to 1 cent?)

Thus, if you’re not comfortable dealing with risk and are afraid of losing your capital, think twice about investing in stocks.

Lesson #2: It’s not easy to make a profit week after week after week


In the past years, many Filipinos were lured into stock investing because of the promise of “quick profits”. Indeed during the first half of 2013, a period of all-time highs in the PSE, making money was easy because almost all stock prices were going up.

But in the latter half of 2013, it seemed like everything reversed. The U.S. Fed’s decision to wind down Quantitative Easing (QE3) caused uncertainty and volatility, sending investors into panic selling mode and, unfortunately, locking in real losses.

Thus, we can see that profits are not always sustainable especially in the short run.

It’s not entirely impossible, though — we’ve seen excellent chartists and technical traders regularly beating the market — but the average stock investor may not be equipped to constantly make winning trades week after week.

Thus, my advise: if you are to invest in stocks, go long-term.

Make sure you do not need the money in the next 6 months or 1 year or even 2 years. Otherwise, you might have to liquidate a loss in case you’ll need to pull out the investment.

Only venture in stocks if you’re willing to trade short-term paper losses for gains that may come a lot later — perhaps in 3 or 5 or 10 years’ time.

Lesson #3: Stock trading is not for everyone


I’ve realized that there’s a certain investment profile that matches stock investing. Not everyone has the risk tolerance, investment personality, and financial capacity to venture in stocks.

Unfortunately, many Filipinos who tried stock trading do not recognize this. Many simply jumped on the bandwagon because they were convinced by a friend who supposedly “made millions of money” or were promised guidance by “gurus” or “mentors” who can supposedly give infallible advice. Of course, we learn now, this is not true all the time.

Stock trading is risky and you could lose money. So if you are to dabble in stock investing, ensure that you have the risk appetite to swallow possible losses.

Do not try stock trading just because it’s “cool” or “everyone’s doing it”. If you fear losses, you’re better off investing in relatively safer assets such as time deposits, bonds, government securities, or money market instruments.

That’s it! Those are my 3 biggest stock trading lessons. What’s yours?

Share your own stock trading lessons below!

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James Ryan Jonas teaches business management, investments, and entrepreneurship at the University of the Philippines (UP). He is also the Executive Director of UP Provident Fund Inc., managing and investing P3.2 Billion ($56.4 Million) worth of retirement funds on behalf of thousands of UP employees.