Stock Market for Beginners

I’ve heard so many times from many of my friends who have been interested in investing:

“I’ve been meaning to start investing, but I don’t want to lose money.”

I’ve worked at an asset management firm, and heard from many clients:

“I want to make lots of money on stocks, but I don’t like any risk at all.”

Face it, if you didn’t take risk in life, you wouldn’t get anywhere. You face risk every day by waking up and crossing the street. I mean, you could’ve gotten run over by a car, right? You face risk by eating at the local restaurant. What if there was some kind of unknown, deadly pesticide in your food?

Sure, these are extreme cases, but the same concept applies to the more mundane things in life. You risk getting rejected by that girl you have a thing for. You risk failing at that job interview tomorrow. There’s risk in every little thing you do in life, and the more risk you take, the more potential reward you’ll receive.

The thing is, dealing with risk is a learned skill. You can’t just one day turn a switch on and have it all figured out. There’s a reason you had training wheels for your bike before you took them off.

The same goes for investing. You have to start small and work your way up. Here are some ways to get your toes wet:

• Test the market with a simulated portfolio
• Buy a market index like the S&P 500 (SPY)
• Look into low risk mutual funds

You must learn to overcome the inherent fear we all have of loss. You can start by investing a small portion (however much you’re comfortable with) of your total investment balance and gradually add to your positions. Put enough in that the money will motivate you to learn, but not so much that you won’t be able to fall asleep at night. Once you’ve gotten used to the natural fluctuations of the stock market, you’ll be able to better maintain your composure and prevent panic the next time a loss hits your portfolio.

My Life

I’ve spent my whole life dealing with risk. I’ve lost thousands of dollars on a single poker hand and I’ve lost thousands of dollars in a day in the stock market. The thing is, I’ve learned to set the emotions aside and realize that those losses were a blessing in disguise. These losses forced me to reevaluate my strategy and change them for the better. Losing is the best motivation to make me learn how to do it the right way the next time around.

If you’re young like me and looking to invest, you don’t have much to lose by starting to invest, and you have everything to gain. What’s the worst that’ll happen? You lose all your money? So what, you learned a valuable lesson and you have plenty of time to make it back. Would you rather have learned this devastating lesson now or when you’re 40 with kids and preparing for retirement? My view on investing is that I don’t care if I make or lose money now, I just want to learn as much about the market as I can. That way, when it’s 5, 10, or 20 years down the line, and I have a lot more money at stake, I’ll know exactly what I want to do with my money.

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