Stock Market Investing – Introduction

On By AdityaIn Stock Market

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

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31 thoughts on “Stock Market Investing – Introduction”

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  5. I am intruiged to see the details of your strategies! Researching stocks (particularly those that pay monthly dividends) is an enjoyable hobby of mine – please do continue to share your knowledge!

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  6. I look forward to reading the rest of your series. Excellent point on how info on the Balance Sheet serves as a guide to selecting the best stocks. Considering checking out levels of debt and levels of revenue. The only thing that matters in investing is Free Cash Flow. Look at the Statement of Cash Flows. Another thing to pay careful attention is to any extraordinary items on the footnotes of your balance sheet. Keep the stock holdings to a minimum of 5% of your portfolio regardless of how good the name is and no more then 20% of your money in a given sector.

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  7. It is most certainly NOT gambling if you educate yourself. That is definitely a fallacy. I too, am a value investor. The Warren Buffett way is the only way! Lol! Just kidding, although he is my hero. I have also recently started to study technical analysis… one can NEVER have too many tools in their investing tool bag.

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    1. Hey, thanks for reading and I too consider Buffett as one of my idols 😊
      I have studied a bit of technical analysis before but didn’t seem to use much of it since it appeared to be useful mainly for the short term, but I maybe wrong. I guess you could throw some light on that 😊

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  8. Matthew Kistner

    Frugalinvestor,

    I think that the information you are voluntarily providing is extremely valuable, especially to the Millennial generation (myself). I invest in stocks but mainly follow the advice of established stock analysts. Although there is plenty of content on the internet that gives investors advice on hot stock picks, it is always worth one’s time to assess the valuation of a company by doing their own homework. I believe you are doing a good thing here, and I plan on keeping up on your posts/lessons and sharing them with friends.

    Thanks,

    -MK

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    1. Thank you for reading Matt. Appreciate your feedback. I am a millennial myself and have learned it’s best to do your own research before investing your money. I’m glad you found this useful and hope you can use it your benefit.

      Cheers!

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