Investing doesn’t have to be scary!
And it should be accessible to everyone!
If you want to really put that hard-earned money to work, so it grows at it’s maximum potential rate, it’s genuinely your best bet.
When it comes to answering the question “How should I invest?”, you need to take a step back and ask yourself these three, key questions:
- What are you investing/saving for?
- How much time do you have/are you willing to put into it?
- What is your appetite for risk?
If your answer to question 1 is anything sooner than 5 years away, I personally wouldn’t bother with stock market investing.
This is because, as everyone knows, the stock market fluctuates over time and to be able to ride this out and ensure you get back more than you put in, you need to invest over the long-term.
Of course, you could invest today and get 9-15% returns, year-after-year for 5 years and then you can come find me and tell me I was wrong, and I’d be happy for you!
BUT, you could just as easily see the market crash in that 5th and final year you intended to be in the stock market and see all your gains turn to dust, just as you wanted the cash.
If you’re investing for the long term though, 5 years+, you have an almost guaranteed chance of riding the bounce-back of any short-term market dips and seeing decent annual returns.
However, your rate of return will largely depend on your answers to questions 2 and 3.
For instance, if your answer to question 2 is “I have a few hours every week to put into this investing stuff and can maintain that commitment for as long as I need to” then great!
For you, I’d recommend researching and picking individual stocks on a value basis. Meaning, you pick stocks you believe, based on your research, will increase in value by a great deal over 2 – 5 years.
By researching, I mean reading their quarterly reports, browsing their website, understanding their business, their market(s), their competitors, getting to know their management and their track-record with leading companies, subscribing to and attending their conference calls, etc!
It sounds like more work than it is.
But in my opinion, if you start picking individual stocks without doing this, your chances of consistent success will be VERY small.
A little known fact:
Most stock market investors who pick individual stocks fail to outperform the market.
This means, these well-payed investors who run large investment funds, worth $millions, most of the time, they fail to grow that money faster than the rate at which the market as a whole grows in the same year.
This is why so many people choose to invest in index funds. These are passively managed funds which simply track those very markets that the investment bankers all fail to keep up with!
So, if your answer to question 2 was “I have very little to no time to spend on this investment stuff, I just want to throw money at an account and see the money grow”, then these passively managed index funds are for you!
I’ve mentioned in a few posts before about how to access these kinds of accounts. But in summary, you need a platform on which to set up an investment account, ISA or SIPP (in the UK). I use Freetrade, but you can use what you like, just research the fee’s. Freetrade is free, obviously, which is why I like it!
If you’d like to get a free share worth up to £200, sign up using this link.
Anyway, once you have an account set up, which literally takes minutes, top it up, go to the available list of ETF’s (exchange traded funds), which are mostly passively managed funds that track entire markets or market segments, find some you like the look of (check the fees!) and throw your money at these every month and watch your money grow! Easy!
Don’t forget to ask yourself question number 3.
Risk plays a very important role. And in stock market investing it can mean the difference between a 10% gain and a 2000% gain, or a 10% gain and a 100% loss.
Ultimately, the investments you make have to be 100%, entirely your choice and based on the research you put in.
If you invest in a company or fund, it has to be because you believe it will grow in value over time. Risk also has the added complexity of perspective…
To you, investing in an ETF that tracks large Chinese companies may sound crazy risky!
To me, it sounds like an opportunity to benefit from an emerging manufacturing and productivity powerhouse economy that is on an absolute rampage in an upward trajectory thanks to an ever growing, ever more wealthy population. Not to mention the rest of the world being hugely dependent on their manufacturing infrastructure.
My personal preference is a mix of the two strategies. I have time, now and again, to research individual companies and I make sure I take the opportunity to do so.
I started investing about 3 years ago, and opened a public account to show my progress and strategy. During this time I’ve built positions in various companies, across several industries. Some examples:
These have yielded some nice returns so far, even despite the current pandemic situation and the havoc its reeking on the global markets.
In fact my portfolio return since I opened the account 18 months ago is 55%, not including cash top-up’s.
My strategy for finding these winning stocks is laid out, step-by-step in the below guide.
If you want to learn my step-by-step strategy for identifying winning stocks like these, click the image below and you can get 20% off my Stock Research 101
I intend to hold these positions for 2 – 5 years and I monitor them regularly to check they don’t stray too far from the path I anticipated.
If they do, I react accordingly and update my Private Stock Group with any Buy or Sell moves I make live, as they happen.
The rest of my portfolio is made up of ETF’s. I’ll hold these for much longer, potentially for as long as I have money invested in the markets and into my retirement. These are ticking away nicely in the background but don’t see the gains my individual stocks have seen so far.
To see my Investment Portfolio in full, every week, as well as:
- My live buy & sell alerts, as they happen
- My Watchlist
- My full list of holdings
- Dividend alerts
- Rapid Stock Analysis
- Tips for beginners
Plus, 24 hour access to me and other investors for Q&A…
Check out My Private Stock Group where I disclose my investment account and all of my positions on a weekly basis with insights & explanations for every move I make, so you can see how I’m taking advantage of this tool to achieve my own financial goals.
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