New to Investing in Stock Market or Crypto? Lessons learned from a rookie

Photo by Austin Distel on Unsplash

To all the people who learned and started to invest in the stock market and cryptos recently, a warm welcome! It maybe is a new step for you to get a further understanding how the economy works and a new way to invest your money.

Following are just a few things I learned in my few years of investing and what I experienced. Consider the following as some ways you can start thinking about how you can invest starting out your journey. Do note I am not a financial advisor.

Have a budget

• There is a reason why this is on top of the list. Don’t spend more than what you can afford or what’s in your bank account. You don't even have to take a loan for this, I would only recommend investing if you have leftover money after you pay all your bills. It’s so easy to transfer money to your broker account these days, Robinhood even lets you start investing without having you wait until the money is completely transferred. Set a percentage of your earnings or know how much you want to spend on a monthly basis.

Be ready to risk all the money you put in

• There are a lot more things nowadays that drive the price of each stock or crypto. A single person with a single tweet can change your life for the better or worse. Or a group of people can come together and help drive the price. It's hard to determine when or how long this stock will take to stabilize. Government can come in anytime, projects can come to an end, the company can go out of business, you have to prepare for the worst. Don’t always buy into the hype.

Start early

“Compound interest is the eighth wonder in the world. He who understands it, earns it.. he who doesn’t, pays for it” — Einstein.

• Even a couple of bucks in a company that has a good history of earnings and has a solid foundation for the future can make you a decent amount of money in 5 years. Trust the power of compounding.

How long do you think it took Warren Buffet to become rich?

Keep up-to-date with everything that is going on

• Every morning, spend an hour learning about what each company is up to.
• What products are they releasing, what are their quarterly earnings, what are their short-term and long-term plans?
• What is the future hold and what companies are helping us get there?
• Have a list of websites that you can stick to that give you the latest news on stocks and cryptos.

Before you buy a stock or crypto

• You should be able to have strong reasons before buying a share and be able to explain to others your stand on it; if you can’t you are not ready to buy or it's too risky. As they say, don’t invest in something you don't understand. You can’t just say I’m buying a tesla stock because of Elon — he knows what he is doing. Unless you regularly spend time with him, you don’t know what he is up to.

Try to set a template of when to buy or sell

• If you are going for the long run you may not be even thinking of selling but if you plan to sell so you can spend another stock or crypto have a template or rule book for yourself.
• The template that you can refer back to anytime and contains a list of details so you don't make impulsive decisions.
• For example; if I want to buy a stock right now and it had a high 100% growth today. If you have a rule to only buy on dips, then follow it. These rules should be written or set on best judgment, the experience you have acquired, and the mistakes you have made previously.

You haven’t lost anything if you haven’t sold

• If you really believe in this stock/crypto and you would like to really continue to invest and you are within your budget — try to buy the dips and hold to bring the average down as much as possible. Remember being patient is the key, it will take a long time for people to be onboard or learn to invest in the same thing you are invested in, after all this is a new space.

See if an automatic recurring investment is for you

• What do you think of spending $5 on your favorite stock every week/month automatically? Apps like Robinhood can do that for you. This way you start small so you don’t have to go all-in on that stock, a week or month may be long enough to get the dips as you accumulate to an actual share eventually. If you are a safe investor this may be your path or if u have a bad habit of spending all your buying power.

Be an individual thinker

• Make your own decisions, trust your process, learn from your losses. Do listen to what people have to say, talk to other people but formulate your own opinions. Some people just get lucky, your turn will also come. Self-learning will help you in the long learn. Be curious, use the platforms to ask others your questions. Join the Clubhouse discussions. Most likely than not they will answer them. If it were that easy everyone would be rich by now.

Ask yourself if you are a trader or investor

“While the terms are often used interchangeably, trading and investing are considerably different methods: Trading focuses on short-term buying and selling, while investing involves buying and holding securities for an extended period of time.” — Ally.com

• If you have the time throughout the day be a trader.
• If you have other jobs, responsibilities, and don’t have much time — play the long game but don't expect to put in 1k today and expect 10k tomorrow.

Diversify your portfolio

• Not doing this may be too risky starting out. You don’t want to put all your eggs in one basket.
• Based on your budget, how much do you want to invest that into EV stocks? Quantum Computing? AI? Health Care Industry?
• What are different Ethereum tokens, what does each one of them do?
• Research all the different industries and see which ones do you think will perform better and split your investment.

Fractional Shares

• This is low-risk and low-gain. For people who want to be safe while investing. Instead of buying an entire share, you can put in how much you can. An entire share for Chipotle at the time of writing this is at $1,333. To own 1 share you would have to put in that amount. Instead, try spending $5 biweekly or monthly to start off. Even if the stock does poorly, you are only losing a small amount.

Cash-out your original investment

• Especially if you are into cryptos where it is so volatile and want to be on the safe side — see if you want to take out your original investment after you have decent earnings. Now you can have your profits sit in there without any worries. Do look into long-term and short-term taxes if you plan on pulling everything out.

I hope these helped in some way or another. Wishing you all good wealth and a successful journey. Be responsible with your money, it is a dangerous field out there. Cheers!