My Thoughts On The Stock Market
If you really want to get rich and are serious about investing, there is no better place than the stock market. It is the quickest way to fill your bank coffers but it doesn’t happen overnight. The stock market is the only place where you can control the flow of your money and possibly make a good profit too. Today, I am sharing some of my thoughts on the stock market.
It is not for everyone
Stock marketing investing is not for everyone. I have been burnt by the market before. At the time I was only a beginner and bet the $1,000 I saved on a company that I thought will be doing great. Unfortunately, I was wrong and the value of my investments quickly deteriorated. After that, I didn’t invest in stocks for 3 years. I understood one thing, the stock market isn’t for the faint of heart. If you can’t handle volatility, you should never invest in the market directly.
Education and research is important
During the 3 years that I took a sabbatical from the stock market, I understood that I need to educate myself properly before I entered the stock market again. To do this, I first began to learn about the basics of stock markets- IPOs, secondary markets, dividend stocks, growth stocks, etc. I also started to learn about different sectors, indexes and different types of investment instruments. I am still learning but brushing up the basics was a game changer for me. Now, I at least make informed decisions instead of blindly putting my money into any company that looks good to me.
Penny stocks are not worth it
I am not saying that all penny stocks are bad. During my research, I have come across some tremendous penny stocks and they have almost always outperformed my expectations. However, the penny stock sector is filled with garbage and companies that would scam you outright. Pump and dump schemes are also very common and you will even see foreign companies avoiding legal IPO route to trade directly in OTC markets. Not all of them are an illegitimate business but they lie in the shady territory. When I lost my initial $1000, it was in penny stocks. I found a stock worth $1 and thought that it would easily fluctuate by 20% and give me a $1,200 fund in the end. I couldn’t have been more wrong.
Understand brokerages and fees
One of my biggest mistakes was not understanding brokerage fees fully. They can easily chip away all your profits. So, if you are making small profits, it is likely that you would end up losing. Whatever little you make could easily be lost because of your broker’s fee. Many first time investors get to know this baffling reality only when they have traded for a while. I couldn’t believe that I was making money for the brokerage instead of myself.
There are different methods of investing
This is an important thing to understand. Stock market investing doesn’t necessarily mean that you sit in front of your computer all day long. You can also choose to invest passively. To do this, buy shares in an index fund or an ETF. By doing this, you will stay invested in the stock market, without needing to actively manage your money. Index funds have historically performed incredibly. If you are in for the long run, you could actually earn massive returns via index funds.
Another method of less-intimidating stock market investing is mutual funds. These funds pool the money of several smaller investors. A professional fund manager then invests your money in different stocks and bonds and gives you a return. Mutual funds can provide you really good returns. It is up to you to actively manage your money (i.e. move it between funds) or simply invest a couple of good funds and watch it grow over time.