April 20, 2014

Getting started to invest your money

This is an exciting topic to talk about as I was in a very similar position once.

First off, I want to talk about some of my personal experience: I started investing on my own at a young age, and since there isn’t much real-world investing experience that you can learn in school, (at any real level), the only way to do so is through experience. Unfortunately, regardless of how good you are, or how you lucky you’ll get in the beginning, you will have an expensive learning experience at some point. Here are a few ideas that you should look into:


1. Read

Absorb as much information as possible. Understand what is going on in the world and relate that information to what you see in your own life, where applicable. At first, don’t try to solve for concepts that are over your head. The investment world is far too big to master everything and ultimately you will be better off by really understanding what you already have some understanding of. For example, if you like gadgets, read the WSJ technology section for macro and company specific news and elate it to your own life. What are you seeing? What trends are developing? What companies are coming out with new products and based on your experience as a consumer, will those products be successful? This is a complicated way of saying “stick to what you know.”



2. Socialize

Investing is inherently social, the only problem with this is that there is historically a large information asymmetry. Historically, my best performing investments were ideas that I received from my professional network of investors, then my friends’ best investments were ideas they got from me, in other words we had a game of telephone going on. The good news is those walls are starting to break down and we are starting to see more democratization of investment knowledge via Harvest Exchange and other platforms. While you probably won’t see the world’s best investors sharing their proprietary models, you will see what they think, and how they view the world. Take this information, absorb it, and relate it to your own life and interests. You should also discuss with your fiends and networks who have a similar interest in investing. Again, Harvest Exchange (Harvest) is a good platform to do so.



3. Practice

Like I wrote at the beginning, learning to invest is expensive, but with new services out there it doesn’t have to be. That’s not to say you won’t lose money from time to time, you absolutely will, but by practicing in a simulated environment you can learn a lot more about the way the market works and reacts to news. I recommend building a watchlist on yahoo finance or creating a model portfolio on Harvest Exchange. The model portfolio is a great way of simulating real world trading based on your ideas without actually risking your own money.



4. Adjust your way of thinking

Start to think about how stocks as businesses that can be valued based on everything that you learned from the above suggestions. Don’t overcomplicate this, as from my experience that is where people tend to run into problems. A stock is nothing more than a percentage ownership in a business, and businesses are driven by simple metrics – sales, expenses, growth etc. Stick to what you know and keep things simple.


In conclusion: the best way to learn is to consume knowledge, socialize your viewpoints with others, and practice. I hope that this article helped you.

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