How I made my first million.
"How I made my first million.
When I was a child, my parents used to tell me to study. They said that knowledge could never be stolen from you. And they told me to be patient. Those words would prove very meaningful…
I always liked to see the numbers in financial journals. They seemed to me more like an opportunity of making money. But I was still a student and did not have any incomes, so those numbers seemed more like a too distant dream. But I really wanted to reach them, and I kept moving… I got a low-money job, and tried hard to save it. Well, maybe I could invest some of it!
In the year of 1990 I bought my first stocks, in an IPO of a local Bank. I received a green paper and I thought that paper maybe would someday be worth something relevant. After some months I had a good surprise: there was some money waiting for me at the bank! I had just discovered the dividends, and that was going to change my life.
After some dividends, the news said the bank would be on trouble, and government stopped the payments to the stockholders for years. I just learned that public companies were not as safe as it seemed. But at that time I was working hard and could wait more, so I kept my paper…
Well, after so many years, I was still poor. I had just completed my graduation, and I spent some more years on a tough postgraduate program. Money was enough to pay the bills and have a car, but that was all. At the year of 1999 I was decided to work even harder to reach my goals. By then I was studying the markets and decided to invest all my free money on stocks. But I was not yet sure about single companies, so I got into an index fund, investing fixed values in regular periods.
At the end of the year I calculated my profits and that was really nice to discover a strong increase in the total amount. The stocks had a good year by then. The next year the prices started to slow down, and I decided to jump off the stock fund and invest on some fixed income papers (the government paid high yield on them).
The main issue of investing on the stock market is that you may follow the growth of the whole economy. When you are relying only on your job, you may not benefice from that growth at all. But there is some other perhaps.
At the year of 2001 I was doing some short term trades, and then something happened to the world. Some terrorists attacked the US, and the world markets melted down… Yes I had some losses, but my decision of staying partly outside market proved to be a right one. Well, the markets kept going, swinging from low to high and then again to low.
By the end of 2002 the Brazilian stocks were cheap. We could buy good companies for low prices. The market was afraid of the new government and this gave to everyone the opportunity to buy. For the next years the Brazilian stock index would increase 9 times, multiplying the capital of long term investors. The local currency grew stronger, there was a reduction on poverty, and commodity prices went up.
What about me? Well, I was trying to surf the market waves at the start of the bull period, and I made some early sales (those mistakes may have cost me some thousands). Happily I got back to some blue chips and stayed on the markets thereafter.
I really loved to receive money on my account, as dividends. I thought that this money could serve to my retirement, but at the end of 2006 the blue-chips yields were low. I then started to pick some high-yield stocks, based on the Graham-Buffett principles of paying a low price and buying good long term companies. That’s how my first million grew up.
When the subprime crisis came in 2008 I was in the market. Yes, I had losses again. But again I had money on government papers (fixed income) that made me stay cool. At this time I had some extra load. I had some more knowledge about the companies, so I could pick up some better priced companies trading for others that would not go so well.
You might be thinking: what about those initial stocks? I sold them a long time ago. No regrets. The bank was sold to a greater player, the dividends were paid, and I went out the trade with some profits. But I still remember it because it taught me about dividends, public companies and the effect of time on investments.
It took me seven years to make my first million. That was a long time. Someone could say that some people never get to that, but I think that many people do. It’s just a matter of patience and discipline. But I still think that was a long time. After some experience and study, I made my second million in 2 years. That was the golden trade. Knowledge turned into money. Just like my parents said a long time ago. "
(Sent by an investor)
H6 Invest
Informations about investing on companies in Brazilian market.