Back in 2013, I became interested in the idea of investing.
I was watching a tv show that featured a brief clip about how Warren Buffet had started investing at a young age and was now worth $40 billion dollars!
Hearing this piqued my interest.
I was 25 and envisaging a wealthy future for myself based on a long-term, systematic wealth building method.
So, I started a search for knowledge on everything I could about Buffet.
I read The Intelligent Investor by Benjamin Graham — the man who taught Buffet in the beginning of his career.
It was a dry read if I’m honest, but a necessary one to get the basics of investing into my head.
With just enough knowledge to be dangerous, I thought I’d try my hand at the real thing and buy some shares!
But in what exactly?
I knew you had to value a stock to see if it was trading at a good price, but I had no idea how to do it.
So off I went Googling ‘how to value a stock’ and reading website after website on various methods and techniques.
I arrived at a valuation method called Discounted Cash Flow (DCF).
The DCF is a classic valuation method used to value stocks as well as entire businesses.
It seemed like a good place to start.
Now I just had to find a stock that had a DCF value about 20% less than the current trading price.
Easy… not!
I decided I would stick with companies I knew, so I started valuing all the big companies I could think of.
Banks, insurance companies, technology companies. But everything at the time was overvalued… according to my calculations.
Then, I arrived at a stock that had a valuation 20% lower than what it was trading for.
Webjet (ASX:WEB).
I knew Webjet. I knew what the company did so I felt I could easily explain it to other people.
But I still felt uneasy about buying their shares.
I had read various books and spent hours trawling investing articles online.
But I still had no idea if I was doing it right.
What if I invested my money but then the price went down!?
What if I lost all my money!?
But I thought back to what I had learned from Buffet.
The price is going to go up and down every day.
I wouldn’t sell my house just because every day someone came to the door and told me its valuation had gone down.
So, I just had to trust in the process.
I took the leap.
I logged onto my broker and put in the buy trade for WEB at $4.050.
Not long after that the trade was executed, and I became a real-life stock investor!
I’ll freely admit I did check my portfolio every five minutes for the next few days (*cough* weeks).
Lucky for me, the price went up fairly quickly, so I was able to sleep easy each night.
Looking back though…
I had accidentally bought myself a winner.
Despite not knowing nearly enough to confidently buy the stock in the first place.
Yes, it was 20% undervalued, but I did not investigate enough about the business’s future plans, what the industry performance looked like, what the competition was, and so on.
But lucky for me all of that worked out and WEB is currently trading at $14.38, seven years later.
At the time of writing, that’s a 255% increase (I still haven’t sold my shares).
Since then, I have bought other stocks to build up my portfolio, but none ever taught me as much as that first trade.
As with anything in life, the first time you do something can be extremely tough.
The uncertainty and hesitation will never be as great as it was buying my first shares.
I trusted in the process.
But today, I have the proof to match that trust.
You’ll never have 100% confidence in what you are doing if you’ve never done it before.
Taking my first dip into the investing world taught me about the process, emotions, resilience and confidence.
All of those lessons helped shape me into the investor I am today.
And I don’t say this as someone who thinks they’ve somehow mastered investing.
The more I learn, the more I know I need to learn.
No two days in the financial markets are the same.
No two investments play out the same.
I’m always having my ideas and opinions challenged by the markets and by fellow investors.
But, thanks to the research I did before buying my first stock…
And the solid triple-digit gains that investment has achieved so far…
I can now buy stocks with confidence in my process — and sleep easy every time.
