Essential Knowledge for Your First Year of Investing: Things I Wish I Had Known in My First Year

Based on the YouTube video by investment YouTuber Pasta-o titled "[Honest Opinion] 5 Things I Wish I Had Known in My First Year of Investing [Investment New NISA]", I will write down my own perspective.

Investment YouTuber Pasta-o seems to have 10 years of investment experience. I felt that the YouTube video was created with a sense of regret and a message for those who are about to start investing. It is content I can recommend.

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I have been investing for 30 years. Honestly, because the investment environment 30 years ago is different from today, it cannot be compared unconditionally.

When I started, there were no online brokerages. It was an era where stock orders were placed at counters or by phone. It was a time without iPhones and almost no PCs. Even today, only about 20% of people hold NISA accounts, but I wonder if anyone even had securities accounts 30 years ago?

The term 'investor' referred to institutional investors, and I think the term 'individual investor' has only become widespread in recent years.

Therefore, as essential knowledge for the first year of investing, I will write my perspective on the five points that Pasta-o picked out as things he wished he had known in his first year.

I wish I hadn't dabbled in various investments

I believe I am where I am today because I dabbled in various investments. Rather than wishing I hadn't, I am glad I did.

Pasta-o concludes that in the end, index accumulation alone would have been fine. However, I interpreted that his experience with swing trading and the like is what allows him to enjoy continuing to invest with his current satellite strategy.

I personally believe that by doing various investments, I have broadened the scope of my actions. I am not sure if it was my first year, but in the early days when I started investing, I dabbled in various investments.

The various investments I experienced include FX, margin trading, futures trading, emerging market currencies, Brazilian and Chinese stocks, structured bonds, etc.
Without any knowledge, I was swayed by information and dabbled here and there.

I have suffered losses so great that they are too painful to look at, but that initiative has helped me significantly increase my risk tolerance. That initiative has become the foundation of who I am today, so I have no regrets.

That is my honest opinion, but it is different when it comes to my students.

When I hold financial study sessions or money consultation meetings, I recommend that people in their first year of investing should only do index accumulation. In other words, it is an instruction to not dabble in various investments and just do this.

I wonder about it myself while teaching, but this is because I believe this method has a high probability of increasing assets, and I want them to first have a successful experience and stay in the investment world for a long time.

Read at least one masterpiece for now

I also recommend that you read the books that Pasta-o presented. I read them too.

However, people tend to pick up books that are easy to read, with large fonts and illustrations, like 'If you do XX, you can easily make 100 million yen!'

I think that's fine, but books by the latest influencers are often written by ripping off the best parts of masterpieces.

Similarly, most investment channels on YouTube are also just quoting and explaining pages from classic books.

Inevitably, these become fragmented books and fragmented videos. When that happens, learning comprehensively and systematically becomes biased.

Influencers and YouTubers are, after all, amateurs and fair-weather investors. I am also just an amateur investor with a long history. Therefore, it makes sense to quote from classic books as a way to supplement this, as they contain universal and unchanging truths.

In that sense, I also recommend that you thoroughly read at least one book that is considered a classic.

I frequently use the keyword "Ignorance is poverty" in my Mako-san Note investment magazine.

I believe it is true that ignorance leads to poverty, but the opposite is not necessarily true; knowledge does not guarantee wealth. However, I believe that by thoroughly reading classic books, you can at least avoid "ignorance is poverty."

The impact of taxes and costs is significant

In 2024, I have come to think that those trading through Rakuten Securities or SBI Securities do not need to worry about this too much. This is because the environment for investing is well-established.

Stock trading commissions have become extremely cheap, and in some cases, they are free. For those with smaller investment amounts, there are services like Kabu Mini or S-kabu that handle fractional shares, allowing you to trade for free. As for foreign exchange, fees for converting to and from dollars were also eliminated in 2023.

It is truly convenient, and an environment where anyone can start investing with minimal risk is being established.

The two major online brokerage firms are desperately continuing a bargain sale and are actively working to acquire accounts. There is no reason not to take advantage of this.

When I started investing, there were no excellent investment trusts, only rip-off funds. After experiencing the high fees of active funds that you should absolutely avoid, I have spent 20 years managing my portfolio primarily with ETFs.

I have seen websites that generally recommend that those who have started investing should choose a specific account with tax withholding and not file a tax return.

I also teach this at my money study groups.

However, I use specific accounts without tax withholding and handle multiple brokerage firms to perform profit and loss offsetting. This creates a significant advantage regarding taxes. This is also an action taken after gaining sufficient knowledge about the impact of taxes and costs.

People who are knowledgeable about investing and people who can make money are different

I was very convinced by this phrase. There are so many things that come to mind.

There are plenty of people around me who are knowledgeable about investing. I have often used the stories of those with abundant knowledge to gather information for my own asset formation.

However, if you ask whether they have been able to build sufficient assets, it seems that is not the case.

I am a person who can make money (don't say that yourself, hey!).
However, I am not a person who is knowledgeable about investing.

While it is not common to compare asset totals, I have a vague sense, based on conversations with old investment friends I have known for a long time, that although I have less knowledge than they do, I am more successful at building assets.

I believe there are two characteristics of people who have a lot of investment knowledge but are not successful at building assets.

The first is a lack of initiative. The second is overconfidence.

The first is a lack of initiative

Simply put, they are "all talk." I specify men because I have never met a woman of this type; they have all been men.

This refers to people who talk big but do nothing in reality. They say all the right things, but their actions do not follow. In short, they are like critics.

I used the sarcastic term "talk big," but the content they speak is correct based on data, and the conclusions they reach are always convincing. They are just people who do not take action. (Reference article link→Critics are people who are all talk with no experience)

People who believed their words and took action (like me) say, "The stock went up! Thank you!" For some reason, these knowledgeable but inactive people are very nice guys who look happy when they hear those words of thanks.

I am happy because I made money.
They are happy just because their information was utilized.
Perhaps it is a win-win situation.

The second is overconfidence

The opposite of the "all talk" man, this refers to a man who is too overconfident in data and his own ideas. Again, I have only ever met men like this.

They will talk to me passionately, persistently, annoyingly, and at length about their favorite companies, which they have identified using fundamental analysis.

He has initiative, but because he cannot see the big picture, he goes all-in on only his favorite stocks. The term "diversified investment" is not in their dictionary.

They are stubborn and bet their future on unpredictable future forecasts, so it seems their assets are not growing well.

My actions that lead to profit

The reason my assets grew is that I focused purely on income from my salary. Looking back, I believe it was because I built a solid foundation with index fund accumulation as the core strategy. It is the same as Pasta-o-san.

In terms of ratio, I operated a 50% satellite strategy quite aggressively. It is not something to compare, but I interpret it as the result of my initiative bearing fruit.
(Reference article link→What is a Core-Satellite Strategy)

I also believe that my portfolio based on age worked out well personally. In other words, when I was young and could start over as many times as I wanted, I invested in a very aggressive, offensive manner, but now I have changed to a defensive portfolio, focusing on bonds to be prepared for whenever a market crash might occur.

My core:satellite ratio in June 2024 was 85:15.
That is quite defensive, right?

If you define your investment core, your assets will grow.

This is the most important and fundamental part. This is the phrase I share on the very first day of my money study groups and consultation sessions.

What is the purpose of your asset formation?
By when?
What kind of goal?
What will you use it for?

I believe that by clearly stating the purpose for which you are building assets and then deriving the means to achieve it, your investments will succeed.

For your reference,
I am sharing two Keynote slides for the study group below.

If you just want to be rich without setting specific goals, your time horizon will be vague, your methods will be unclear, and you will be swayed by what others think, causing your core to waver.

If your core wavers, asset formation will not go well.

Once your core is set, you will only receive the information you need and will no longer be swayed by unnecessary noise.

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After watching Pastao-san's YouTube video, I wrote down my subjective thoughts on his "5 Things I Wish I Had Known in My First Year of Investing." Although there are some differences from his views, I am not criticizing him; I wrote this today thinking it might be a good topic to discuss when I meet him in person.

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