A Decade Of Brutally Honest Trading Advice (AMA)

I've been getting a few questions lately so I thought I'd answer them in this video whilst to take a little stroll down to one of my favorite breakfast spots. So for those of you who are new to the channel, I'm James and two or three years ago I ended up moving out to Asia having spent all of my 20s in the financial markets, which I know sounds very boring to some of you, but essentially I figured out the trading game, I developed strategies, I worked with hedge funds, high frequency trading firms, and in the end by 30 I was managing millions on behalf of pension funds. So the reason I say all of that is because I used the very.

Same skills that I learned during my.

Career to manage my own money. And whilst I can't guarantee that it would enable the same thing for you, it certainly important that you learn how to manage your own money long term. So regardless of the beaches and all the rest, this is my reality. Everything that I put out on the.

Internet I hope is no.

So yeah, this is, this is my day to day. So whilst we head down now for a beach walk, I've got your questions here, beginning with the first one. Is now a bad time to invest with markets at all time highs?

Well.

It'S understandable, it's human nature to feel slightly apprehensive about buying in when the market's towards what could be a peak. But you're not going to know that it's the peak without hindsight. And that's the whole thing. The best time to plant a tree was 10 years ago.

And the next.

Best time to plant a tree would be today. So what I mean by that is that you need to stop looking at charts and worrying about market timing. Time in the market will generally beat market timing and over the long run.

Nobody can time the market. So that's how you, you perform best.

In fact, there was a study by Fidelity a few years ago, the US broker, that looked into the performance across all of their client accounts. So individual investors perhaps like you and me, and what they found is that the best performing client accounts were those that had basically not logged in for the longest amount of time, whether they were dead or had just forgotten the logins. When the market's at all time highs, it can be very difficult to override the behavioral biases that of course we all have in terms of practical steps to make that easier to deal with. As a professional, you develop a process, a process that, unlike that of many retail investors who tend to use charts, doesn't focus on price action so much in fact, in my case it's probably less than 10% of my overall process which is fundamentals focused and any charts or momentum that I might look at really comes at the end and it's not going to override generally it's not going to override or be the, I should say the, the reason, the overwhelming reason or justification for buying something or not. It's more case of like the reason you don't do something, but it's never going to be the reason to do something. So when it's not your primary focus, you're then less likely to be head faked in placing as much weight on what price is doing. The other thing to note is that there's been something like 1,300 and I think it's 16 all time or record highs going back to 1950.

And the.

Majority of those led to successive highs. So in other words, when the market is at a record it tends to go on to make new records more often than it being the peak and it collapsing, which makes sense because the market just grinds higher over time. So how do you buy into the market when it's at all time highs? Well I embrace it means that there's no overhead resistance. So second question, why do most traders lose money? Well half of the reasons are in that first answer. Again it comes down to mainly human emotions, cognitive biases and of course to a large extent naivety and laziness in not having access to the right information or ultimately not seeking it in the first place or bothering to apply it, looking for quick fixes, chasing short term gains, in other words, quick wins, trying to be rich overnight. The only thing you're going to be overnight is broke. So that's another key thing and I think it's.90% of retail traders will lose pretty much all the money, 90% of the money, within the first three months, 90 days of opening their accounts. So keep in mind that's people who are generally falling for and being seduced by all of the flashy marketing on social media and online in general, which comes from retail brokers, typically derivatives brokers, those that offer forex, CFDs, all those kind of risky products. And the reason they have to do that as I try and navigate these uncharted waters without getting my feet wet, is because they've got some, they've got a leaking bucket basically because all the majority of the clients are blowing up and losing the money. They've got to find new clients to replace them constantly, they're constantly churning the client base. So the Reason most lose is because they're being shown falsely that there's this utopia that exists whereby you can make quick money just trading off charts without having to think for yourself and do any homework, any hard work, and it's going to be really predictable. You can even automate these things with trading bots and it'll just trade for you or give you signals and indicators. It makes it look easy, it makes it look simple and repeatable. And in any form of marketing, I know a little bit about it. That's essentially how people are going to position these solutions. So it's human nature to still be seduced by that, even when you know better. And clearly there's a lot of fools or willing fools out there. But in terms of what you can do about it, obviously seek out the right information. If you're watching this, then you know it's. And it's something I did professionally for over a decade and I've continued to do with full personal risk with all of my money now. So hopefully you can find in this the answers, the information that you need. Of course, I've got a program if you want to check that out, link in the description.

I won't kind of labor the point.

Here, but yeah, I need to find a way across these choppy waters to the other side. Next question, let's get on to something a little bit more interesting and novel. How much money do I actually need to start Investing? Probably about 5 million quid would be good because then earning 10%, you'd be pretty much set for life. Half a million quid a year sounds good, right? Studies have shown that the benefits of a lump sum, so in other words, having a big starting amount are overrated. Even if you have only an average income, which in the uk, for somebody about my age and presumably around ages of you guys watching this, give or take, is 40 grand a year. That is sufficient to set aside £500amonth. It's roughly the way that's determined as a rule of thumb, and this of course is not personal financial advice, is that you should be looking to contribute half your age in percentage terms. So again, for somebody who's 30, is 15% of your 40 grand a year, which my V used to be a little bit lower. I think it was like six grand a year, but it's at it and then hence you've got your £500amonth. That should according to historical returns, which of course are no guarantee of future results. See you retire a millionaire even with.

The average historical return.

And of Course in terms of what I'm teaching, what I hope you can go on to do by eliminating fees.

Which is really, really important that you avoid.

And they are not factored into that scenario. So having an advisor could seriously fuck that up.

With £500amonth, you should be able to.

Do better than the index. That's the goal. And even 2% per year better could add as much as 60% more to your final retirement pot, which is absolutely insane.

All right, we found a spot, ordered some breakfast. We're here. Let me just spin it round, show you what's. That's kind of. What a beautiful little view down here. There we go. Anyway, unfortunately, we've got to get back to the serious topics of investing because we've got barking dogs behind me. So what's the single biggest mistake you see new investors make? I think a lot of it touches on the last question, right? So assuming that there's this shortcut to overnight success, that you can actually make money x percent per month and that things are predictable. It really isn't. You need to learn patience and have discipline and of course, have the right process in place so that given time and discipline, it's actually going to work. So it's just so easy to be misled. Buy all of the bullshit that you see online. I'd probably have my back to the ocean view and everything else and be sat next to some rented Lamborghini if I was trying to sell you that kind of flash stuff. There's just so much shit there.

Just as a.

A sidebar, here, something that I saw the other day, there's this ad that's going over Instagram and it's in my feed at the moment and it's for someone I'll name no names, but you probably know who they are, who fits the stereotype. The cliche of being in Dubai is about 22. The rented Lambo, Porsche, Ferrari, the rented villa, all that other shit. By the way, not old enough to have been through a postgraduate investment banking program. So I don't know how or where you've got professional training experience. You don't have it. But by the by, it's of course posting the picture of the cars all the other. And talking about all these clients have made all this money trading forex, all this. Thanks, brother. And how easy it is for you to join for free and get these signals in this day trading discord or Telegram group or whatever it is. Now, of course that's bullshit, but humans, like I've just said, are easily seduced. By that kind of thing. The reality of how that works, not just this guy's operation, but basically all of them that you see offering something for nothing, something free. Join this group. It's signals or whatever, is that they partner and they are compensated via their sponsoring partner. Their sponsoring partner being ultimately the broker behind them. So what they're doing is they're acting as the funnel for the broker in fixing their leaking bucket, which I just spoke about, due to the fact that the majority of punters are just coming in and burning up, like blowing up their accounts. These brokers are desperate to get new clients through the door. Now, particularly if they're a shady broker or they just popped up like a bucket shop. So they probably are shady, but they have no reach, no clients, no real marketing budget. They'll go to these guys that have clout on Instagram because they've just been shilling people relentlessly without any conscience and any professional reputation at stake. This is why they're willing to do it. They're fucking desperate. They're as desperate as the clients or the punters that they pull in for the equally desperate brokers. So when you see that. Thank you. It's being compensated behind the scenes. Just look at that breakfast. Thank you, brother. Thank you. Okay, back to the lifestyle shot. Look at that.

Beautiful.

That is my favorite breakfast. A nice little ice cappuccino. So that's how those things work.

It goes without saying.

Don't fall for them. Can be more easily said than done. Particularly when you're at the beginning, you're just starting out, and you're trying to find the truth. You're just bombarded with bullshit. What? Alliteration. And yeah, it's very hard.

Anyway.

Fuck me, that's good. First coffee in the morning. First of many. So that's how that stuff works. If it's too good to be true, it usually is. And that is how those guys are operating nowadays. They're probably burnt through their offer, trying to sell courses they ultimately had no value to offer, and people wise up. So what they do is they start posting signals or offering some free telegram or discord or whatever. And what they're doing is they're receiving probably a cut of the commissions or the client flow, as it's known from the broker who's reselling that flow. There's all kind of shenanigans that go on. It's really murky. And the reason they're in Dubai, aside from the flashboy bullshit aesthetic, is that they're often trading or marketing unregulated investments, things like crypto until recently, it's kind of becoming regulated now. Forex, it doesn't apply to. And yeah, basically things other than stocks which are regulated and, you know, properties the same and yeah, require you, like me to tread carefully and be compliant with the truth. So anyway, waffling on, that's how those things work. And yeah, in Dubai there's not the same level of financial regulation either, particularly dealing with clients internationally. So avoid that like the plague. Next question. Should I just stick to ETFs or pick individual stocks? Well, you know my view by now. I spent my career as a fund manager picking single stocks. I was paid to do that. The only reason I stayed in that seat and had a career is because I was good at it. Which is not to brag, but it's rather to confirm that it is possible to beat the market by picking stocks contrary to what you may read online and what you may hear, where if it's not the bullshitters with the forex trading signals and all the other shit in Dubai, it's gone completely the other way. It's so polarized while on the other end it's just people saying there's no point trying to beat the market, just buy ETFs. ETF and chill. That's so fucking complacent. If everybody was there, at a minimum, as a bare minimum, the world would be a better place. But unfortunately, what it's doing is it's breeding complacency or laziness into people who are otherwise interested in and capable of, of managing their own portfolio, picking their own stocks, and who probably enjoy it as well. And what it's doing is denying them from going on to make better returns. And like I said before, even 2% over the market, compounded over typical investing horizon, will add hundreds of thousands, even with average contributions to your final potential. You can even add a million quid in real terms, depending on roughly where you're starting. It's not impossible at all. It makes such a difference in the same way that Avoiding a typical 2% advisor fee saves you, in other words, adds back hundreds of thousands. Even with average contributions, it's absolutely essential that you're not complacent or naive to the difference that even a couple of percent can make. I'm 100% invested in single stocks. I don't mess with ETFs, certain family members who don't have the interest. For example, I think of my mum, I do some single stock stuff for her, but I would otherwise, you know, Just say stick in an etf. But my mum is not a business owner or a self improvement bro or whatever, like a business owner and entrepreneur, solopreneur, whatever you want to call them nowadays. Yeah, the world nowadays empowers you as an individual. As opposed to coming from the old model where you work for the firm, you follow the convention, or the traditional model of going to university, getting a good job, getting racked with more debt, getting a mortgage, getting married, getting the kids, been locked down and locked into the state, to your employer, to the tax system, all the rest. Nowadays it's about autonomy. So if you want true autonomy, you're probably also the kind of person who should look into having autonomy or taking control over their investing and not outsourcing it to advisors, losing it to charlatans, or just being so complacent and naive. It's almost a dogma now. So hope that sums up. How do you know when to sell a stock? This is a really good question. So many people focus on like the signals, right? Particularly in the bullshit end of the the game. They focus so much on signals like what to buy and when to buy, but you don't know when to get out. And this is in fact one of the main reasons why you should never trade on somebody else's idea or stock tip. And I know this from first hand experience. A fair few years ago now I bought into Greek banks, one of which at its peak a few years before I bought in, had traded at a price of 7 million euros per share. This will presumably be adjusted, but that's where it was effectively 7 million euros per share. I bought in at €70. So from 7 million it's dropped to 70, it's basically fallen 99% or whatever. So it was bombed out. Rumor had it that Greece, and therefore the banks, the banking system was going to see some restructuring finally. And therefore the things that had basically gone to zero were like buying a lottery ticket or a call option, a free call, so to speak, where there's like a. It can only go so far down, you can lose 100% of your money, but no more. But the upside is like the convexity was crazy, like the embedded leverage was nuts. So anyway, we can start using. I'm being into these fancy terms there, not intentionally, I've caught myself doing it with what was ultimately a stupid decision. So that investment, that stock, and I bought a couple of them at the time in my pension, I keep them to this day as a reminder. They're worthless anyway of how stupid this was. According to the chase, it fell a few years later to 70. 70 cents. So from €70 to 70 cents. So what's cheap today can be even cheaper tomorrow. But the meta point I was making here is that I'd bought in. I'd get a fair idea of where I'd want to cash out. If it rose, it would be like, okay, it would be the me point of like, how much money I've made. Which, you know, as a pro, I've been in a few times and personally once or twice, albeit I tend to do less risky stuff nowadays, I would kind of know where to sell on the upside. But for most people who would sell too soon because they'd snatch at profits because it's not their idea, they don't know what it's worth to begin with. But getting back to this specific example, which of course went against me and is the worst trade I've ever made, I've never repeated it since. I've never tried our tips since. This came from a guy that I worked with called Raoul Pal. Probably seen him on Diary of a CEO recently. This guy was obsessed with Greek banks and all the macro masturbation. But anyway, on the downside, you fucking freeze. You don't know where to sell either. So you end up either getting rid of it the moment the idea goes against you because you expected it to be right, or you end up hanging onto it. You freeze and hold onto it indefinitely again just hoping that one day it'll recover because actually you have no idea what it's worth. So yeah, that for sure is one of the mistakes that even I've made, right? Gone back a few years now and haunts me to this day. But if you don't know what you're buying in the first place, and how the hell are you going to know when to sell? And inevitably, your idea, your conviction in that idea, which you lack if you haven't originated the idea yourself in the process, is going to be tested the moment the price goes against you. And price will inevitably move against you. It's just random noise in the short term. So when do you sell? In terms of how I invest now and how I invested for the fundamental, I did so with a long term horizon, so I wouldn't sell any individual stock inside of two years. There are reasons for that, backed by research, which I explained in my other videos, if you want to check them out, also inside of the program. But in essence, anything I bought I had to hold for at least two years. So that kind of gets you halfway towards the answer by saying, I know when I'm not going to sell, so I'm not going to sell inside of two years. I wouldn't sell on the basis of valuation. So if I've bought at a reasonable price, I'm not a value investor. So I'm not looking to buy cheap. I'm looking to buy the best quality out there, hopefully at a reasonable price. I'm not valuation sensitive. So that also translates not only to when I buy, that also translates to when I would sell or when I wouldn't sell, which is I wouldn't sell on the basis of valuation. So when something's become expensive, I'd keep it. As long as a company continues to grow its earnings, which quality businesses will tend to do more predictably and more consistently, therefore valuation really doesn't matter so much. So the fact that then we see bought in a low point and the earnings powers compounded in your favor.

It really doesn't matter.

There's an anecdote going back to, I think it's the 90s, the comparison between Coca Cola and Pepsi. Pepsi was a new kid on the block. Coca Cola, of course, had been around since the 50s and 60s and was like the number one. And I think it was even Warren Buffett, who famously loves his Cherry Coke or whatever, always has a can of it on his desk. His sin of omission, as he refers to it. So the things that he overlooked that he should have just bought was actually Pepsi. When he was still holding Coca Cola, Pepsi was disrupting things. They were the hottest ticket in town that nobody was committing to buying. It reminds me a little bit. It's different, but it reminds me a little bit of Nvidia at the moment, because that actually, as I say this out loud, is a company that is obviously the hottest thing on the block, but a lot of people are touching, but I just cannot touch due to the valuation. So anyway, same thing. Back then, everything was going for Pepsi. It looked as though it was going to overtake Coca Cola or certainly disrupt their share. But for the fact that it was trading at like 40 times earnings, I don't know where Coke was. It was much lower, probably closer to the market, which historically has traded around 16 times earnings if you're looking at a PE ratio. So it's considerably more expensive. But what happened is that the earnings, because Pepsi continued to grow at the expected rate, continued to compound at an insane rate. And it also began paying dividends and compounding the growth in dividends as well. That's a story for another Time or topic for another time. Because I don't necessarily seek companies that are paying dividends. And that's another misnomer or misconception that people have. I'd rather see those excess profits reinvested. And there's a measure for this that I look at reinvested inside of the business. If you have this insane business model, it's very difficult to find a replacement. It's like the replacement rate. It's very difficult to find another idea or another incredible business that's capable of generating profits at that rate.

So please don't spit it out and.

Then leave me with cash that I need to reinvest somewhere else. I just want you to reinvest it inside of the business. So you scale, that's the idea. Profits on profits and you compound internally anyway, being overly sensitive to valuation I believe is a mistake. And as it relates to knowing when to sell a stock, that's a really bad idea. Basically it's the rating, the stock's rating. If it's high, it's high for a reason. If it's low, it's low for a reason. Ideally, when would I sell a stock? Only when the story has changed and it no longer meets the criteria for ownership. So that would be according to the seven factors, which you can learn more about in my other videos. It would be when they no longer meet those seven factor criteria. Owing to the fact that these are established businesses, quality companies, they don't turn on a dime. The business models often haven't changed now for the fundamental trajectory and profile typically hasn't changed for decades, certainly for years in many cases. So it's unlikely that's going to change in a quarter or a couple of successive quarters to begin to spot a trend like three or more quarters.

Right.

So things aren't going to change often inside of a year, inside of even a few years, there'd have to be something cataclysmic and very often that produces an opportunity. Buy great companies and do nothing was the mantra of Terry Smith, one of the best performing fund managers in the UK for the last decade or so, who also coincidentally was a quality focused, long term, so patient investor, applying a similar process to myself. How do you avoid panic selling when markets crash? So a perfectly rational decision maker would know not to sell. They would hold because the rational outcome is logical outcome is to know that it will recover eventually. So no, there would be no panic selling. So if you look at the opposite of that, you would say that you would need to eliminate emotional decision making. So not get involved by removing yourself from the screen, from the charts, from the process, from checking your account, all of that kind of thing, from the news flow. And the only way you can really do that, unless, you know, you throw your iPhone in the sea and hide out on a desert island and you're not working, so you're never looking at your laptop and you, I don't know, you're a hermit or a recluse and you don't speak to anyone, you're out of the news cycle, it's not possible. The only way you can realistically do that is by having a process like mine that doesn't focus on technicals, it doesn't worry about news flow, is certainly not short termist and you've committed to a minimum two year horizon on individual positions and you know that ultimately what the game is and the reasons why, backed by evidence and data, the reasons why you're investing for the long term, when you own quality and you have conviction in what you own, you understand what you own first and foremost. You know that those companies are going to be around for the long haul, they're going to weather the storm and see it through. So why the hell would you sell now? Why would you sell at a shit price when you know that it's going to be higher in the future? It becomes a lot easier then to hold on to what you've got and not be shaken out by volatility and ultimately fear. And as Buffett says, who also takes a patient long term approach in typically, although it has a bit more value till typically quality or durable businesses like myself and like Terry Smith and so on, you don't give a fuck. Would you sell your house because the market's crashed? No, not unless you needed the money. If you don't need money, why the.

Fuck would you sell?

Like your, you liquidate your pension, which you can't get your hands on now, you don't need that money, so to speak. Now would you liquidate your pension and sell your house because property market's crashed 30% so let's sell my house. You had no intention of selling it before, but how are you going to sell? You're going to panic, what the fuck. Approach it in the same way. It's loss aversion, it's a behavioral bias. And whilst again you can't eliminate these completely, you can learn to recognize them, recognize what's driving these behaviors or these emotions, these thought patterns, then fucking put it in its box, in its place. And with having the right things and the right attitude in place to see that it becomes a lot easier to manage. So, yeah, if you're somebody who struggles with that, and many people do, I would say just stop looking at the fucking news. Get a process that you fully believe in and you understand, first and foremost, go for the long run, keep shit in perspective and ignore the noise. Hermes is still going to be making handcrafted luxury handbags for the 0.1% of society, right? The ultra rich and who will be even richer emerging from a crisis. Right? Which is the point. They'll have had all this capital to deploy during a time of crisis. They'll come out on the other side even richer than they went into the recession or the crisis. Hermes will sell even more in the future than it ever has, regardless of whether or not there's a correction or crisis. If anything, they'll sell even more if there is a crisis. So it's taking that kind of mindset and that view on things, having that perspective that ultimately helps you to avoid panic selling. But I see too many people doing this. Of course, it's the consensus, the herd mentality, and that's how it transpires or plays out in the markets every single time, same as ever. So, on that note, hope you found that useful. I haven't really done a Q and A before.

It's the first of them.

If you have found it useful and you stuck with me to the end, then drop me a comment below, let me know what your problems are, what your questions are, and I'll look to answer them in another video. I'm doing these little beach walks day to day typically, so it's dead easy for me to bring the camera along. I've enjoyed it as well. Tuck into my breakfast and yeah, if you want to give me a follow, obviously you can do so here, but check out Instagram as well, where I'm posting daily videos, and you'll find links there to some of the other resources that I've got, like the guides and also the watch list, the top stock support that I've got at the moment, amongst other things. And of course the training video which offer there, which takes you through the AI that I've developed using a custom GPT. So it should be very familiar for you alongside the course I've made inside of my program. So, yeah, check it out, hope you find it useful and take it easy. We're not a Lamborghini in sight. I'll run out.