Stock Market Lessons

Lately, it seems like the stock market is being invaded. All types of people started investing, but especially normal people. This is mainly due to the new platforms that let everyone invest starting from 1 dollar, in any type of stock. But for beginners, the stock market is like gambling. I hope to give some useful tips to those beginner stock market enthusiasts, so they will lose less money and gain more.

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Lesson 1: Don’t be crazy

Don’t invest a high amount of money from the start. I would recommend starting with 100 $ until you learn about how the stock market works. Try to double that money, if you invest in growth stocks. Once you learn what there is to know about the stock market, you can add up more.

If you want to go for a safe route and invest in stable dividend stocks, you can add up more than that. But I would recommend a recurrent investment each month, of 20% of your total income (if you can’t afford 20%, add only 10 each month). Some good stocks for dividends, in my opinion, are Intel and Coca-Cola.

The key point is to start small, even if you have more money to spend. The reason for this is to limit how much money you will lose as a beginner. Because you will most likely lose money at the start of your stock market journey.

This will be caused by bad stock analysis since you don’t know how to properly due-diligence a company and, even more so, due to lack of patience and bad decision making. In the beginning, you will literally have panic attacks if you add up too much money and see that money fall down by 10 20%, or more. Be a smart lad and start small, or you will regret it!

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Lesson 2: Don’t panic

If you invest long-term, you need to choose a stock you believe in, or a stock that has a proven track record of stability. Add money each month in that stock and don’t look at it! Just add and forget!

I teach you this from my own experience. In the beginning, I used to watch the stock every day, sometimes even multiple times a day. That is a very bad thing to do. You will always feel like selling it, both when it falls down, so you can cut losses, and when it goes up because you would want to cash in.

Choose the right stock, one you believe in, and stick to your decision. If you invest in something long-term, tell yourself you won’t touch that investment for 1, 2,5 years. And then stick to your decision no matter what.


Stick to your decision no matter what.

If, however, you want to invest short-term, make sure you do your due diligence the right way. A good way to invest in a short-term manner is to collect data and promising stocks from other investors. There are many nice YouTube channels you can follow where people who really know how to analyze the data of a company will tell you what stocks will go up soon. Read, and watch their opinion, but always do your own due diligence! Then choose some stocks and invest in them.

You can also try something like Copy-Trader, where you put your money in some other investor’s hands, and let him invest for you. This way you won’t have to research anything. You just add money to that investor’s wallet and let him do the work for you. Whatever butters your biscuit.

Olav Ahrens Røtne on Unsplash

Lesson 3: Invest in what you understand

If you are a professional in some domain (in my case Artificial Intelligence) try to stick most of your investments around that area. Invest in companies that you understand and have the best knowledge in analyzing their work and their potential.

The other way to do this is to follow a stock for some time. Read about it, analyze it, and look at how it performs in time. If you find out that the company is outperforming or is very stable, start investing in it. If it underperforms in time and has no potential for the future, you need to move on and find other opportunities.

As a rule of thumb, I recommend choosing 10 stocks you like and following them. Even investing a small amount in them. Stick to those stocks for around 6 months, and after those 6 months, draw a line. Which do you keep following and which do you let go? After this period, you can even invest in them. But remember to keep your initial investment small!

Tom Pumford on Unsplash

Lesson 4: Don’t invest what you are not ready to lose

This could be obvious from the first lesson, where I told you to invest a maximum of 20% of your income. But in case you have money stored up and want to start investing, be sure you are willing to lose them. Invest your money the smart way! Or you will cry like the man in the picture!

I recommend, out of your savings, investing 80% in a safe dividend stock like Intel, Coca-Cola, or S&P 500. This way you will be sure you won’t lose most of your money, as those stocks have a history of relative stability — and dividends.

For the rest of the 20%, you can invest in high-risk growth stocks. But here, you need to do your due diligence and choose the right ones. Don’t go too crazy. Or go crazy if you are really ready to lose that 20% or double it. At the end of the day, it’s your choice how you do it!

Conclusion

All of those lessons are coming from someone who has done stock trading for more than 4 years. I have doubled my money once and then lost 50% because I haven’t done the right due diligence for my investments. Overall, I still gained a lot of money from my investments, and I am planning to keep this up!

I only hope that some of the lessons I gave you will help you not lose too much money, and help you invest the smart way so that you can get some extra savings in your purse.

Remember, nothing is more important than your physical and mental health! So do things right!

Stay safe!