The first response to investing in the stock market for many would be “I’m too scared to enter the market. It all seems like a gambling game”, whereas some others respond as “You can get rich really quickly with day trading”. If you seem to have a similar reaction to this idea or have been listening to people with these ideas, then read on.
While the stock market is certainly not a risk free investment like a government bond, it is certainly not a gambling game, nor is it a get rich quick scheme. For anybody to succeed in the stock market, there is one and only one key attribute that separates a success from a failure – PATIENCE!
Most day traders claim to earn several hundred or thousands of dollars in a single day and propose to make you a millionaire following their only strategy. A day trader might have had some good days in his career, but in the long run, day trading is not a strategy that must be adopted by a retail investor as it is bound to fail. Not only will you lose your money, but also lose the faith to ever invest and attain your goals of generating a passive income.
For those who are unaware or fearful of the market, you are in luck! With this multi-part educational series, I intend to cover various topics related to the markets, to provide long term strategic growth that does not involve any day trading methods, irrational decisions or a promise to earn millions in no time. This process is slow but profitable. During the entire series, I only intend to provide FREE information enabling you to make the right decisions, with no market calls or stock tips. If you visited this blog in hopes of knowing the next big stock to buy that would get you out of that massive debt and into a new car, then read no more.
So let’s begin this journey, keeping in mind that this is also a test of your patience and willingness to learn. Rome wasn’t built in a day and neither is Wealth!
Our goal is to enhance our understanding of how the market works in general and how we can invest to generate a source of passive income. I do not encourage anybody to quit their day job and invest full time into the stock market, but use their savings to maintain another stream of income. In order to make the right choices, you need to take matters into your own hands as opposed to listening to countless analysts on television, deciding how you must spend your savings on his/her list of stocks. If Warren Buffett relied on analysts, he would not be the third richest man on this planet, or the greatest investor known to us. Doing your own research (DYOR) is the first step in this journey.
Here’s a list of topics I intend to cover during this series:
1] Recognizing Company Potential - Fundamental Analysis a. Balance Sheet b. Profit and Loss c. Financial Ratios 2] Market Capitalization 3] Value Investing - Computing the Intrinsic Value of a stock 4] Picking the RIGHT stock 5] Understanding Mutual Funds
There are several topics that may need more coverage and your feedback is of utmost importance to do the same.
Stay tuned for the first part of this series where we will use a live stock example to understand its financials and recognizing the potential of the listed company. Let’s embark on this journey towards a rewarding future of financial independence!
Be Frugal, Be Smart, Be Rich!
Begin this Series ⇒ Fundamental Analysis I