Investing is ideal for those who are looking to save money and earn some return on their money rather than let inflation eat away at its value. If you stash money under your mattress or keep it someplace in your house rather than invest it, you either don’t know how to invest or don’t want to invest. We are going to assume that you are part of the former group. So, lets get started.
First lets look at a common approach taken by a few. They open an online brokerage account and started investing in stocks right away. At times they get lucky and make some profits quickly and other times they lose their investment principal quickly because they didn’t the knowledge in the first place. The smart ones seek mentors who are experienced investors. My mentor gave me these extremely valuable tips – (A) Begin with paper money and not real money. Stick to paper trading or investing in a simulated environment (usually online websites) where you keep track of your buy/sell orders (B) Understand how businesses function because when you own a share of stock, you actually own a part of the business (3) Record your investment successes, blunders and everything you learn in a journal. In this you will also keep track of each and every investment. Ideally, you should also record all the reasons you enter or exit and investment. This will not only help you figure out whether your strategies are working and also help reduce the impact of your emotions on your investing.
These techniques have helped me immensely become the investor that I am today. Of course I still make mistakes. They are unavoidable. But, I make far fewer mistakes the profits are much higher because I learn and apply these strategies on a daily basis.
A lot of people ask me whats the best way to learn. I think the ideal way to learn is to shadow a successful investor or apprentice under someone. This isn’t always possible due to several reasons. If you are also in the same situation, your next best bet would be self-learning. There are several excellent books on the subject of investing that are available in your library. You can start by looking at the top 5 books in the investing category on amazon.com and borrowing them from your library. I would suggest starting with ‘Random Walk Down Wall Street’. This gives you a good understanding of the basics of how the stock market works.