Investing 101 Part 1
Educate yourself, Get the required knowledge
If you are an investing beginner in the Investment world, you should not be diving head first. Trust me, it’s not a good idea, I’ve tried it and I got burned for it. You should definitely start by reading some basic investing books, or take some investment classes.
Investing: Investing for Beginner by David Morales
Stock Market Investing for Beginners by Mark Atwood
Investing Quickstart Guide by Ted D. Snow
These books and courses offers nothing fancy, only the basics for any investing beginner such as what is a stock, what is the stock market, how does it work, how to evaluate a stock to see if it is overvalued or undervalued, making sense of any stock tables and the ratios associated with it. These basics are what really matters, they will give you understanding for the building blocks to come.
You should also get some financial apps to help you keep track of the market in general, to get a feel of what it is like to follow the market. You have a financial advisor and he, she, or they is taking care of all of your investment? You think you don’t need to know anything? You should think otherwise!
You should still know what is going on on the market and keep track of what your advisor is doing. Not only are you responsible for your money, but also for your own financial health.
Get some Advice from Experts
As an investing beginner, you are new to the investing world, you are starting to learn your basics. Like any other activities/hobbies/sport you definitely should try to get advice from experienced investors before diving in.
Loosing a lot of money because you made a newbie mistake that could have been avoided if you had talked to some friend, is something you don’t want to happen.
As an investing beginner, you should be risk averse. As you keep learning and trying out small investment, you will be able to take some extra, calculated, risk. What you want is to talk to people that are actively investing. Most likely some of your friends and/or family are already investing and could be great allies. There is a good chance that they’ve made some silly mistake of their own and this knowledge is yours to take!
If you can't loose it, don't invest it.
That’s one of the best advice that was given to me by a coworker before I left a position at DHHS.
All investments have a certain amount of risk associated to it. If you absolutely need that money to pay for your credit card, pay your insurances, just don’t invest it! There is a chance that you might loose that money and will not be able to pay your bills.
If investing that money would make you loose sleep or would stress the hell out of you, you shouldn’t invest it. Never forget that you and your health are far more important than your investment!
Invest in things you are familiar with.
“Why not invest your assets in the companies you really like? As Mae West said, ‘Too much of a good thing can be wonderful.'
— Warren Buffett
If you are not familiar with it, you shouldn’t be investing in it. Why? because it will be harder for you to detect when thing are starting to go wrong or when it’s going up. This piece of advice is good for any type of investment, not only for the stock market!
If you are good in flipping houses, keep doing it! After all, it’s a form of investment and it’s has less risk because you understand it. If you have a good understanding of a certain industry, biotech for example, you are in a better position to understand the up and down of the industry. You will be able to pinpoint when the industry is booming and when it’s in a downturn so you will be able to act on that.
Compounding is the key for investing as a beginner.
“My wealth has come from a combination of living in America, some lucky genes, and compound interest.“
— Warren Buffett
Compound interest. What does it really means?
Money makes money over time. The money you, wisely, invest now will grow exponentially. If you understand this correctly, the sooner you start your investment, the more it might be worth later. If you start investing, even a small amount, at the age of 18, even if you put only a few tens of thousands of dollars of your money, over the years, there is a good chance you can a multi-millionaire when you retire! You get it? The younger you start investing, the better it will be!
Start investing now! And you could do it with a low investment money market account.