What is investing?
Investing is when a trader holds a stock for a long period of time and to then sell it when it is optimal to make profits. The trader can either sell parts of his or her position, or the entirety of it. Investors take a considerable amount of time to analyze and research about an asset that they want to invest in. The asset could either be a stock from a company, a crypto or even real estates properties. On this website, we will mainly focus on investing in a company and cryptos.
Investing focuses on the long-term outcome of an asset thus, short term movements are irrelevant to an investor. Most investors look to hold a position for at least five to ten years. Therefore, a market correction of for example 10% in a month is irrelevant compared to the overall performance of the stock over multiple years. As an investor, you should worry more about any changes in the company’s principle that may impact its initial outcome over the years that you had foreseen. For example, you do your research on an electric vehicle (EV) company that produces luxury and standard vehicle. You love the progress that it is doing so far, you love the management team, and you foresee that company selling and being very profitable over the next 5 to 10 years as EV demands keep rising. Suddenly, the company decides to make changes in its principles by stopping production of standard vehicle and only focus on the luxury vehicle. You analyze the company again and you do not like this decision since it will focus on the wealthy people, therefore you decide to stop investing in that company. Theses kinds of changes in principles of a company are much more valuable reasons to stop holding a position in a company as an investor compared to short term movements of a stock.
Main Advantages VS Disadvantages of Investing
Short term movements are not as valuable to your position.
There is no need to pass everyday looking at the charts to monitor movements.
Never miss any stock movement in the company you are invested in.
Long-term investing strategy involving compounding over time.
Less risks involved.
No need to study the market fluctuation on a daily basis.
Easy to dollar cost average a position by adding money on a constant schedule or by to add when stock dips to major moving average like the 50, 90 or 180 days moving average.
No short-term profits or losses. This can only happen if you sell earlier.
It is a long-term investment, you must be patient.
Must follow and read each news and earning reports on the company you invested in to be updated with its progress.
What do I need to start investing?
The initial set up to start investing is a computer, internet service, a brokerage account, and funds to trade with.
How to become an investor?
To become an investor, first you need to learn and understand the basics of the market you choose to get into whether it is in the crypto world, the stock market or both. The next essential step is to choose one or a set of high quality stocks that you are willing to invest in for the long term. Companies, that according to your analysis, have a bright future and that will execute over the next years. It may be hard to do the analysis of a company as a beginner but in today’s era you can easily learn by looking at other more experienced investor’s due diligence of a company by following them on twitter, YouTube, and other social media platforms.
Making your own due diligence of a company that you want to invest in is key to investing. There will be multiple news that may be negative or positive over the short term and during your investment journey. As an investor that had done their due diligence that news should not bother, and you should stay disciplined. Another key element is to invest in companies that you understand well, do not invest into something that you do not understand.
How do you invest?
There are multiple strategies to invest in a company over the long term depending on the amount and how often you want to invest in. The key element is that the fund you choose to invest with has to be funds that you can put aside without it interfering with your other life expenses. There is not point of investing an amount if you need it in 2 weeks to pay bills.
We recommend 3 strategies when it comes to investing. The first one is investing on a scheduled basis. This means that you decide a fix schedule where regardless of the stock price you will invest a fixed amount. For example, every 2 weeks I decide to invest 700$ in company X.
The second strategy is to dollar cost average to lower your cost basis. In this method, you purchase more stocks when the stock price is lower than your average cost. This helps to lower your average cost if the stock goes lower than the price your bought it for. Therefore, you only invest when stock goes down but when its higher you just enjoy the ride and if you want to you can take some profit. This is a strategy that Ark Invest like to use a lot they sell their winner when they are at all time high but when they dip, they buy more and more.
The third strategy is again to dollar cost average but this time when the stock hits major moving average such as the 50, 90 or 180 days moving average on the daily chart. You can choose the time frame you want to go with, a 50 moving average is more aggressive, and a 180 moving average is more of a passive approach. This method means that if ever the stock is trading for example lower than the 50 moving average, you invest more at that period because you know you are at a good deal from the past 50 days.