Today I received one of my Individual Investment Account statements and that again spurred some though around investing and the series we look at last week regarding income. Have a read here, here, here and here if you missed out on those. I don’t want to mislead anyone here and I am not going to make this a full blown “how to” or “get rich in stocks” or what not. There are plenty of resources and thousands of other great websites and places for information that you can thoroughly educate yourself on how to utilize the stock market, what can and cannot be done, etc. A book I can recommend you begin with is part of the “dummies” series called [easyazon_link identifier=”047090545X” locale=”DE” nw=”y” nf=”y” tag=”hk030-21″ cart=”y” cloak=”y”]Investing for Dummies[/easyazon_link]. It’s not going to make you an expert, however it does give you the fundamentals you’ll need to educate yourself on stocks and markets and various meanings like PSR, P/E, ROE and so forth.
Sitting back and having your money grow is a dream for many of us, however in today’s finance world you can pretty much put your money anywhere. I want you to get a glimpse of the stock market with this post and I want to convey to you that you can become successful with it, meaning you can put your money into stocks and watch it grow with confidence.
If your new to investing, your best bet is going to be to invest into a few high quality stocks, perhaps even popular ones. Traditional companies you can name off the top of your head. Then again it also depends on how much you plan to invest and what industry you feel comfortable in. If you are a small time investor you don’t (and typically won’t) be able to invest into a diverse portfolio of 10, 15, 20 stocks. Get a feel for how the market works and select a few promising stocks at that given moment. If you lose, use that experience as a learning as to what you can do better. I’ve learned to follow my companies closely. Everything from earnings calls to sales, to debt and equity. When I first started out I could have cared less about an annual reports and Standard and Poor’s stock reports. Because when you know what went wrong, you are in a better position to make a better trade the next time around.
But before we even speculate on losses, go play a little with some virtual cash. Games like Investopedia’s stock simulation will give you a taste of what its like to invest. I use to do it as well. There are a number of simulation programs available online aside from the aforementioned one. Its a great way to test your strategy and hone a few skills before trying a potential portfolio and risking your hard earned money and when that time does come and you feel ready to invest, make sure that you have the strength to hold onto your stocks for a long period of time. Stocks will fluctuate in the short run, however I’ve come to learn that patience is key. You could go and play with [easyazon_link identifier=”1118521692″ locale=”DE” nw=”y” nf=”y” tag=”hk030-21″ cart=”y” cloak=”y”]Penny Stocks[/easyazon_link] and there are real success stories out there like the one of Timothy Sykes, but that’s just not for me at the moment.
There are various methods you could execute on. Whether thats starting with a lump sum and off you go or contributing to your portfolio on a regular basis dependent on your pay check and follow your gut instincts once you educate yourself and feel that you have the right knowledge (never stop learning though)! You can create any kind of strategy and model, but keep in mind all the data out there are guides, not oracles, otherwise we all would be billionaires. The data is there to make the most calculated risk on the assumptions we have, unless your insider trading and that’s illegal.
Simply try to understand the risks and different types of investment. Stocks are usually riskier than bonds however riskier investments may have higher payoff potentials while less risky options tend to provide lower but consistent returns. Whether you will or want to invest in stocks, understand the differences in the various options you have. Its not just about educating yourself on the stock market. You need to make conscious choices about what you do with your money the way I do with mine (or ours in the case of our family). Be wise, don’t blow it all out. The goal is financial freedom and a better future. Sometimes you’ll need to take a gamble but cut the risk where you can and play how you feel you need to play. You don’t need to be a cowboy, but can be. You don’t need to be the nerd not risking anything, but you still can be. Nothing wrong with either of those.
If there is another thing I’ve learned over the years, its to stay away from companies you don’t understand. If you cant immediately say in a short paragraph what the company does, how it make money, who are its customers, where the industry is going and so forth than either you have more homework to do or you need to step away.
I know this is not rocket science, but I want you to be thinking of options on how you can better your income, secure your future and potentially get a good return on your investment. This is just one of many ways. And when it comes to the stock market the secret formula to making money is fairly simple, purchase low and sell high. This by no means is any financial advice that you should execute on. You should go do your homework if this would be something that interests you, have a game plan, stick to it, understand the market, remain strong, see success. Feel confident about what your doing with your money and perhaps your new side income. And again, there are a ton of resources out there that can help you kick start everything. From the basics of the market and trading to vocab and formulas and how to read a candlestick pattern.
Any thoughts, comment below!