So you’re just out of college, into your first job, and now want to “invest” or “get into the stock market”.
I’ve been there too. I started out clueless like you, and eventually learned the ropes.
Remember, the theme of my posts are all about principles. This post will give you the basics, but always invest or trade based on your principles.
Cover the Basics
Before throwing away income into someone else’s hands (This is what investing is essentially), you’ll want to cover your financial basics.
If you can answer Yes to the following questions, move on to the next step.
- Are my budgets in order, and do I know how much is coming in and out?
- Have I accumulated an emergency and/or general savings fund?
- Have I paid down all my debt?
- Did I setup a basic retirement account and with automatic payments, in case I stay in the Middle Class?
- Have I given considerable thought to a side hustle or other passive income?
After answering yes to all the questions, read my guide for principles to follow during economic recessions.
Lastly, my best article about the ONLY TRUTH that exists in the market will give you THE foundational principle which can be applied to any market or investment strategy.
Investing and stock trading without covering your basics is like trying to ride a bike before you can walk.
Find Good Sources of Information for the General Market
Before putting any money at stake, you will want to find a good editorial about general market trends.
Now, I am not talking about stupid free internet articles like MarketWatch, CNBC, or any other mainstream site which provides information for free.
Many of their Free websites’ headlines and articles are written for shock value. These sites are only there to attract readers and market a certain product, advertising, or for a columnist’s exposure.
You’ll want to find a source that writes information about the general market, the statuses of various industries, trends, and major companies. This will be your bread and butter to gain the general sentiment in the market.
Actively engage and be observant of your daily life. Remember, the market is not all about money. Its about people, products, social trends, culture.
Basically, take everyone’s day-to-day living trends, and aggregate them together, and that is basically what Investors mean when they talk about “the market”.
A subscription magazine or other paid source of information is the best way to learn.
Here are a few basic Magazines I enjoy reading:
- Financial-Advisor Magazine
- The website is free, but only registered advisors can subscribe to the actual print. It is a good source of information since the website isn’t targeted for consumer web traffic.
- Barron’s Guide
- Investor’s Business Daily
- Both Barron’s and Investor’s are popular. I prefer the print magazines because it allows me to focus more and allows me to think and read slower than an internet article.
There are many more magazines that you can find online, these are just some of the popular ones.
Pick an Interesting Market Industry
Next, choose an industry of interest. This will give you a more focused approach to investing instead of flailing around like a chicken with its head cut off.
Learn a how a specific industry works. You will gain more insight into how different companies interact with each other.
This is especially important if you work in an enterprise. Here are a few examples of “Industries” that consist of many companies and players.
- Tech and Internet : (Apple, Google, Microsoft, Salesforce … )
- Aerospace and Defense : (Boeing, Northrop, Lockheed, Raytheon, UTC …)
- Energy : (G.E. , PGE, Edison, BP, Exxon …)
- Semiconductors and Hardware : (Intel, AMD, Micron, ATIC Global Foundries, TSMC …)
- Pharmaceutical : (Pfizer, GlaxoSmithKline, Bayer, Abbott …)
- Food : (Kellogg, Associated BritishFoods, Coca-Cola, General Mills, Nestlé …)
- Auto : (Do I even need to name them?)
- Mining …
…and the list goes on and on.
Choose whichever industry interests you, and find the appropriate source of knowledge for it. I can’t really recommend as it is so specific to your interests.
Pick the Right Investing Tool or Broker
For the beginner, the best investment tool I recommend is Robinhood. Since it is a new and “hip” investment tool, many people I’ve talked to dismiss it outright.
It gives commissions free trades with the convenience of your smartphone — and nothing can beat that.
It is the best tool if you have a a small investment budget. There are more complicated tools and brokers out there, such as Td Ameritrade that provide awesome analysis tools, but they cost a lot to use.
For a more passive approach to investing, you can just put more money into your retirement fund, or use robotic advisors like Acorns, Stash, or Betterment. Better yet, Vanguard offers one of the lowest fees in the market.
There are automated tools that drain small amount of money from your checking account into investment portfolios. Stash allows you to be a “thematic” investor and choose Industries in which to put your money in. Other tools automatically choose your portfolio for you.
Some advocate to start paper trading first. If you want to become a day trader, it’s a good idea because you can practice before putting money at stake.
For general investing, its just a waste of time. Putting real money at stake forces you to be more careful and really analyze your choices before making them.
Investing is just an extension of your financial management skills.
After covering the basics, your left over money should always be used to increase your wealth.
It takes time, and study, and reading the proper materials. Information is essential. Study the markets and industries which you are interested in.
You should ALWAYS learn as much as you can about the company. Proper analysis of cash flow and value metrics are essential. This is called Value Investing.
In my next post, I will write about this as the second part to this guide.
Post in the comments below : what is your favorite industry and what’s the recent trend you’ve observed?