There’s likely never been a better time to start investing.
In the last few years, the stock market has proven its resilience as never before in its history. Not only did the market bounce back from the worst of the pandemic within a few months, it has since continued to grow, bringing massive rewards to the investors who maintained their course despite global headwinds.
During the same general time period, the market has also become more accessible than ever. As mobile trading apps offer the ability to make zero-commission trades to anyone with a computer or a smartphone, the number of people investing has skyrocketed all around the world.
While some longtime industry experts will say that this change has mixed benefits, the overall trend is a positive one — as long as people learn how to invest wisely. It will take time for the insider knowledge of Wall Street to make its way through the general public, but given the widespread use of the internet to learn, well, everything, it only makes sense that trading wisdom will become more widely known.
We’re talking about self-education here, which is exactly what articles like this are meant to do: Draw upon the experience of successful investors to make trading — and its rewards — more accessible to all.
Given that inflation is becoming an increasing problem around the globe, one could argue that learning to invest is no longer a benefit, but a necessity.
Here are a few tips for investors still learning the ropes of this complicated endeavor.
Leverage Your Knowledge
There are many famous investors in the world, with Warren Buffett likely topping the list. But all of them achieved that success by becoming experts on a particular industry or segment of the market.
So if you’re looking to get started with investing, one of the best things you can do is ask yourself: What do I already know about? Maybe you have vast knowledge of the technology industry, with a keen eye for detecting new trends before anyone else. Maybe you love cars and have a deep awareness of the companies most likely to continue selling their vehicles.
Whatever the subject, your first step should be identifying your greatest pool of knowledge and then expanding it. Make a daily practice of tracking market trends surrounding that industry. You want to know what you’re talking about before making any trades.
As John Maynard Keynes, the famed economist and investor once said: “As time goes on, I get more and more convinced that the right method of investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes.”
Learn The Context
Once you’ve established what industry you’d like to focus on, the next step is to put that knowledge in context.
For example, if you know about the auto industry, you should be keeping tabs on major changes likely to affect that industry in coming years. If you were one of the people who saw the potential of Tesla 10 years ago, you would likely have a lot of money right now, with no need to take advice from an internet trading article.
Successful trading is often about identifying trends before they become news in the mainstream media. By that point, it’s often too late to reap the biggest rewards. Smart traders try to find global patterns and then put them in the context of a single industry, and then a single company.
As Peter Lynch, the famous head of Fidelity’s Magellan Fund put it, this step is all about doing your homework.
“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards,” Lynch said.
Study The Pitches
Any company looking for investors will have pitches meant to convince them to shell out dollars. These pitches are meant to be convincing, but learning to read between the lines of these pitches takes time.
You want to make sure you read many pitches from many different companies before finally choosing one to invest in. It’s always risky to invest in a company early on, before they’ve really proved their ability to succeed in the marketplace — but that’s also when you’re likely to reap the biggest returns on investment, said Sheldon Inwentash, CEO and Chairman of ThreeD Capital, an investment company based in Canada.
“We get involved very early. A lot of people can be afraid of being too early. A lot of them prefer to come later on, in later stages,” Sheldon Inwentash said in a recent interview. “We take a significant portion of that risk in terms of financial commitment to these companies.”
Investing takes time and hard work, just like anything else. Remember to be patient, and avoid risks by trading with intelligence.
