“When I was eleven I got the truly dict

My uncle pulled me to the side, and he schooled me quick

Told me some gooey spit:

You can’t get paid in an Earth this big?”

Cam’ron

I found myself in an interesting situation. It happened several months ago. I experienced what some might call, “f*ck you money.” I thought about buying a ticket to Jamaica.

I am now 10 years in the game of markets. I just had the best and worst year of my career. The gains I saw were quick and fleeting. I was humbled beyond what I thought was possible.

Earlier this year, while my portfolio was booming, a good friend said to me, “You’ll return to the average. That’s where we all end up eventually.” I thought that was a great line for the humility and the mathematical truism behind it. I laughed.

I should have taken him seriously.

I took abnormal risk. I had abnormal gains. I had abnormal losses. That’s what happens. But it happens to everyone. In his thirties, Ray Dalio lost everything. He had to sell his car and borrow $4,000 from his dad to get back on his feet.

What I am about to share are 50 things I learned about the market in 2018. I write this down to become a better thinker, a better person, and a better investor. You can find links to lessons learned in previous years at the bottom:

1. If you’re in the market for quick riches, you will lose.
2. The worst thing you can do is talk about your portfolio when it’s up. It becomes a social status rather than a means to savings and self-sufficiency.
3. The next worst thing you can do is act like you’re the genius behind your gains when most likely it’s luck or coincidence or a bull market.
4. But the worst thing you can do, the absolute worst, is take credit for your winners, but not also accept responsibility for your losers. It’s not algos or politics, it’s the decisions you made.
5. 2017 was a reminder of why cash sucks. 2018 was a reminder of why cash rules. One of these is not normal.
6. It’s easy to think in days, hours, and minutes. It’s hard to think in months and years. One of these is more important to your well being.
7. Simplify the noise around you by controlling your devices. Restart your phone to its factory settings, be selective with the apps you add, rework your notifications on email and text.
8. In uptrends, everyone looks to technical analysis. In downtrends, everyone looks to valuations.
9. Quarterly earnings movements are noise. Avoid them at all costs. Stocks move 10%, 15%, 20%, in a few seconds after an earnings report. Don’t ever play in that game.
10. People will research a car or a TV for days, weeks, and maybe months before buying. But they will buy a stock in 30 seconds. I did not make this saying up.
11. If you don’t read one investing book per month you will lose to others who are.
12. You only do dumb things when you don’t have a plan.
13. Systemizing your investment decisions will minimize stupidity. Especially elements of human cognition of which we have no control. Algorithms are your friend.
14. It’s not about the smart people in markets doing smart things, it’s more about the dumb things happening you can’t make any sense of.
15. Anyone who says “institutions” has no idea what they’re talking about.
16. Anyone who says “smart money” has no idea what they’re talking about.
17. The stock market is filled with gimmicky sayings. They’re fun. But they’re dangerous. The quicker you realize that the better off you are.
18. Free cash flow was my favorite metric. Now, it is margins. Control of margins is power. That’s a company you want.
19. If you have strong free cash flows and control over margins, you might have found something.
20. Buybacks after the fact are meaningless. You want to find companies that haven’t yet announced a buyback, but are in a position to do so. Sell your shares back to them.
21. If you have an idea, always remember that’s all it is. An idea.
22. You will be better off having fewer ideas, and more focus on a select few key things.
23. Technical analysis is best used for relativity. For example, the performance of one asset vs. another.
24. Charts paint a picture. They are sentiment. Look for one or two important levels and that’s it. Because if you look long enough, you will find anything you want and that’s dangerous.
25. Relativity is just as powerful in fundamental analysis as it is technical analysis. If you are buying company A, why are you not also buying B, C, and D in a similar field?
26. You can’t time the market, but the market also isn’t going anywhere. It will be here today, and tomorrow. Never rush.
27. You never had the money if you never sold, and took the gains.
28. Directional options trading is designed for huge risk and huge reward. But even with that being said, you should have a ratio. If you own 10 calls, find a way to own 2 or 3 puts.
29. Hedges usually suck, until suddenly they matter.
30. Everyone has had, “big gains” and then missed out on selling at the perfect time. Everyone. That’s part of it. Don’t dwell. Think proactively about what will change in the future to reduce that occurrence.
31. 2018 is a reminder that you can never read anything on the surface and accept it as true. Fact check as much as you can.
32. Anything you read in the news is most likely a PR coordination between multiple parties. Don’t fall for PR.
33. When listening to the news, headlines or “experts” make sure you research their motive and bias. Why would they say that? Why are they saying it now?
34. I used to believe politics don’t matter when it comes to stocks. I was wrong.
35. The volatility of politics can spill into the volatility of markets.
36. Politics create the best shorting opportunities.
37. Politics rarely create great buying opportunities.
38. A great portfolio manager I know told me, “never short on fundamentals, only short on news.” I agree with that.
39. Find the people who did well in bear and choppy markets. Those are the people you want to know and surround yourself with.
40. Write everything down. Put your thoughts on paper. Reflect on them when something good happens whether it’s good or bad.
41. You can’t be a good investor unless your personal life, at work or at home, is also in a good place. If not, they will eventually clash.
42. Never do anything with your portfolio after a long night or not enough sleep.
43. Having a stop loss is good. But having a profit target, a point at which no matter what you will sell for a profit, is more important.
44. Your best positions will always be the ones everyone else hates. And when their pessimism shifts to optimism, you’re onto something.
45. In life, talk is cheap. In markets, talk is expensive.
46. Your desire to learn more about philosophy and history will help you draw parallels to the things happening around you.
47. Money is not the point of investing. If it is, you will naturally gravitate to more risk and bigger swings.
48. Investing is for happiness, community, intellectual pursuit, and the growth of capital markets in your country or the companies you care about.
49. Everything decays over a long enough timeframe. Nothing does not decay. In markets, you are fighting against this natural force. You are playing defense, not offense.
50. Watch more stand-up comedy. They turn the absurd, the difficult, and the hard to comprehend into humor. Now imagine if you could do that with markets.

Thanks for reading.

Remember to follow me on Twitter and StockTwits. Also, you have to sign-up for my email newsletter.

To read my lessons from 2016 and 2017, please go here and scroll down.

See everyone in the new year. I am planning a post in early January about how I will position my portfolio, and what I am looking to accomplish. 

Stay tuned,

Stefan Cheplick