Live in the present while investing your money for the future.
In this post we will be talking about investing for beginners and will include investing research for those who want to create a financial plan. Whether your goal is to retire, cut back on your working hours in the future, or make millions, you will need a plan to get there. It might not seem possible, but today is the best day to start financial planning to build wealth for your future.
We all want more money and more time; investing will get us both. But first things first – we need to answer some questions. How much do you want to invest? This money comes out of your monthly income, so how much are you willing or able to part with? If you lost all of that money, will you be ok without it? If so, plan an amount you’re willing to lose. There is risk to investing, so get that crazy idea that you will only win gains out of your head right now.
Once you have decided on a budget, research where you want to invest your money. Personally, I like the “invest in what you know”approach. I like stocks, work in IT, and understand agriculture and geology. I like to keep my focus on IT first, agriculture second, and minerals third. I have several other investments, but they make up less than 3% of my total investments. For instance, disruptive technologies and the products and services these innovative technologies will need as they develop.
No one can guarantee a completely risk-free investment, but we can hedge our risk with diversity and knowledge. Careful consideration at the beginning will protect us because investing won’t always go as we planned. That said, developing a financial plan is simple. I use a spreadsheet where I compile all the stock ticker symbols of companies I like and am considering as an investment. I separate the companies by industry, and then I begin my research.
If we study the strategies of large investors such as Warren Buffett or Benjamin Graham, we conclude that all good strategies are based on a high level of knowledge. Education is the quality that distinguishes winners from losers.
“In the world of investment, courage is an unparalleled virtue. Then comes the knowledge and good, tested and proven assessment “
-Mr. Jack Ma
Here are some examples of research methods that work:
Research stock exchange funds.
If you want a hands-off approach, look into bonds and ETFs (exchange-traded funds). Find ones comprised of good companies that make up 80% of the ETF. If you want to be hands-on and like certain companies, then look into the details, read their annual reports, and check their cash vs debt ratios. Also educate yourself on how much of the market they are leading, and how much more they can grow. Decide what type of investor you want to be by reading my blog post on 5 Different Types of Investors.
Look into peer-to-peer investment opportunities.
Lending on the principle, this “man-to-man” approach, is a relatively new concept that has developed on the basis of Internet technology and is a form of online lending without the participation of banks. Using the appropriate P2P platform, you can become an investor in loans and other things including startup companies and products. These platforms work pretty well at the moment, but there is a risk that the lender will default on the loan.
Invest in corporate bonds.
Bonds are long term holdings which you can purchase and resell. Research domestic and international companies such as banks and large energy companies. You can also buy energy ETFs, like the ticker symbol USOI, which pay large dividends. Be careful, however, because energy is on weak ground these days. There are many changes happening as we undergo an energy revolution. I know a lot of people who lost a lot of money when oil tanked; pardon the pun.
Research government securities.
Government securities are easy to trade, and as a general rule, they have a low growth rate but the risk is almost zero. Of course, in the event that a government loses the ability to repay its debts, the collection of this type of investment becomes problematic. Investors must take into account when choosing this type of investment.
Perform Forex market research.
This type of investment brings in the largest profit, but it is definitely associated with the greatest level of risk. Therefore, many people are wondering if Forex is really the best place to multiply money.
The only investment with zero risk is that which you invest in yourself and your knowledge. Investing in education brings the biggest profit over time!
Avoid the 10 most dangerous thoughts and feelings people have about stocks that influence their investing decisions (paraphrased from statements by investor Peter Lynch):
- It’s gone down so low it can’t go any lower; no one has ever gone bankrupt with no debt.
- It’s gone this high already, how can it go higher? People sell too soon thinking it’s not going to go any higher.
- Eventually stocks always recover; not true in many instances over market history.
- It’s $3.00, how much can I lose? $3.00 obviously.
- It’s always darkest before the dawn. This is not a winning strategy. The market can always get worse.
- Someone buys at $10, then it falls to $6, then $4 and they say if it gets back to 10 they will sell. “The stock doesn’t know you own it.”
- Look at all the money I’ve lost, I didn’t buy it… Stop worrying about what you didn’t do and keep focus on what you can do.
- I missed that one, I’ll get the next one. Buying the next of something doesn’t usually work, the second company often doesn’t do as well as the first.
- Stock prices have gone up so I must be right; stock prices have gone down, so I must be wrong. Stocks go up and down a lot in a year.
- Avoid longshots, whisper stocks, and penny stocks. If you’re talking to someone and they lower their voice and tell you about this stock that’s going to do this and that and it’s sensational, beware. Lynch said he has never broken even on a long shot.
