I’ve always been interested in investing, but I haven’t always had the bandwidth to learn.
In May 2017 when I was finally able to get my head above water, I wrote down a list of questions that other brand new investors, like me, might ask.
First I made a list of all the terms I needed to research:
- asset classes
- dollar cost averaging
- Class C and Class A stocks
- P-ratios
- short/shorting
- short sell
- gross margin
- penny stocks
- blue chip stock
- SEC filings
Then I created a list of questions:
If you own shares of a company that offers dividends, but then you sell your shares of that stock, will you still receive dividends for the period when you owned the stock?
Where can you find a company’s income statements and balance sheets?
What’s the best strategy for selling your shares of a stock, i.e. when is it most advantageous?
Do you need special knowledge to become a day trader? Can you day trade on Robinhood, or is it best to go through a brokerage firm?
Best case scenario, what’s a realistic amount that an inexperienced investor can potentially earn in their first year of investing?
Then I summarized the tips from the resources I’ve been reviewing:
- Diversify your investment portfolio to minimize potential losses
- Decide what kind of investor you want to be. A day trader? Someone who puts money in and just leaves it there? A penny stock trader?
- Invest less than two-thirds of your funds in your brokerage account. Leave one-third in case your stock falls.
- Read the quarterly reports, annual reports, investor relations page, etc. for the stocks you invest in (or plan to invest in).
- Set a fixed amount that you plan to invest each quarter or each year.
- Read The Intelligent Investor by Benjamin Graham
- Research/study best practices of prominent investors
- To diversify your portfolio, plan to invest in no more than 5-7 stocks TOTAL (as a beginner)
- Decide what your investing goals are. Pay off debt? Earn additional income? Save for retirement?
In early May I invested $50 into my Robinhood account and purchased two shares of Ford stock.
In mid-May, I put in $200 more and bought one share of Netflix stock. I plan to keep them for the long haul. In the meantime, I’ll continue to research best practices.
The month has been up and down but as of today with my three shares (2 Ford, 1 Netflix), I’m up $3.15.
What tips would you recommend for a brand new investor?
