What is your investment philosophy?
It’s really quite simple: Investors should become co-owners of a number of excellent companies. Being a co-owner of a company means that you have a long time horizon – years rather than days/months – and that you understand the business you own a part of. You effectively become a co-owner of a company the day you buy a share in the company. The goal should be to own a minimum of 8 companies, which effectively limits the risk if one or more of the companies run into unforeseen difficulties.
If you don’t have the time, interest or skills to analyze companies, the sensible alternative is to buy the entire market through an index. Typically via a Danish index fund or foreign Exchange Traded Fund (ETF). Make sure you choose a reputable provider with a low annual percentage rate (APR), such as Vanguard or Blackrock.
You can read my full investment philosophy here.
What are the risks of buying shares?
Be aware that the stock market is volatile by nature. You can compare it to an old-fashioned pendulum that swings from side to side, but is rarely in the middle.
It is quite normal for individual companies and even the entire stock market to lose 30-50% of its value. Historically, the major stock markets have experienced this 1-2 times every decade. This happened most recently during the financial crisis in 2009 and the Corona pandemic in 2020. These are the fluctuations that investors have to live with in order to get a good return.
If you have trouble sleeping at night when your portfolio is halved in value, the stock market is not the right place for you. At least only for a small part of your savings. But if you can resist when the pendulum swings against you, you’ll be richly rewarded in the long run.
How much of my savings should I invest in shares?
Before making investment decisions for unrestricted funds (not pension), make sure you have enough savings to cover both fixed and unforeseen expenses. In my opinion, you should have at least the equivalent of 3-6 months of salary payments. For many, this means that you should always have 50-150,000 in cash in an account.
Think of it as insurance in case you suddenly lose your job, it rains through the roof or you need to help a family member or friend. By having such an ’emergency account’, you minimize the risk of having to sell your shares just when the stock market hits bottom. Read my guide to allocation here.
Should I borrow to improve my return?
For private investors, the simple answer is no. I never borrow to buy shares and neither should you. Borrowing to invest in listed securities is called ‘buying on the margin’.
After all, if you stay away from leveraged products and loans, you can only lose what you’ve invested. In addition, you don’t risk your broker or bank calling in their loan just when your portfolio has dropped significantly in value (their collateral) and it’s therefore the worst possible time to sell.
I've never invested before. Are there any books or sites you can recommend?
For private investors, the simple answer is no. I never borrow to buy shares and neither should you. Borrowing to invest in listed securities is called ‘buying on the margin’.
After all, if you stay away from leveraged products and loans, you can only lose what you’ve invested. In addition, you don’t risk your broker or bank calling in their loan just when your portfolio has dropped significantly in value (their collateral) and it’s therefore the worst possible time to sell.
A great place to start is Peter Lynch’s“One Up On Wall Street”. Although it’s a few years old, it’s an easy read and a good introduction to the art of analyzing and investing in companies. The same goes for Joel Greenblatt’s “You can be a stock market genius“.
If you need practical help getting started with investing, I’ve gathered all the relevant information and links here.
Can I just read this site and start investing?
In principle, yes. But like other decisions in life, it makes sense to explore alternative paths and opinions and make up your own mind. Borsgade is written with the best intentions of helping other individual investors and is based on tested and proven investment principles.
But it’s not professional advice. Ultimately, it’s your responsibility to make investment decisions.
