I stopped investing in the market years ago for various reasons that are quite irrelevant now that the past has past, but a few months ago I decided to get back in because I needed to think about my family and my future. My step father, who has been successfully active in the market for 50 years has been cool enough to school me through the process because I consider myself a newbie. 2 times a week for 4 hours he has been teaching me everything he knows and quizzing me along the way.
- Ask For Help - This one I taught myself because nobody was coming to me to ask if I needed help learning about the market. Yes I could have learned online, read a book or taken a course but the market is serious business and I knew that I needed to talk one on one with someone who knew what they were doing. Thankfully my step father is just the right person.
- Know Your Risk Tolerance - One of the first things he asked me when I started with him was, "what is your risk tolerance?" I said to him on a scale of 1 to 10 I am a 5. I don't mind the boat rocking a bit but if I see an iceberg I know I got on the wrong ship.
- Put Your Toe In The Water - You have to start somewhere. If you wait you lose the potential for growth. The market is a timing with a lot of patience game. Don't jump head in... put your toe in from time to time and watch your money grow.
- Do Your Research - If a stranger came up to me on the street and told me that they wanted me to invest in their company I would say NO! "Why would I then invest in a company I knew nothing about," my step father asked me. I know this concept seems like a no brainer but plenty of times I have felt the urge to invest in what others have researched for me.
- Buy When The Market Is Down - When the market is down don't be afraid to invest. The reality is I don't have money like Donald Trump. It's more comparable to Donald Duck. It's a scary thought to invest when the market is down but I totally understand the concept. According to the charts, it looks like what goes down must eventually go back up.
- Diversify - Do you want to know how I understand this concept? When I was a young man (I might look young but it's lighting) I wanted to diversify my dating life. I went out with everyone and anyone that I found attractive to diversify my experience. Eventually I found the one company I wanted to invest in for the rest of my life. My wife. :)
- Know The Terms - I am not ashamed to admit that 3 months ago I didn't know what an ETF was. I didn't know what a P/E ratio was. I didn't know what an option was. I didn't know what a limit order was. I didn't know much when I was reading investing material or watching MSNBC. I know I know I know... I should have known these things BUT ask yourself this question. Have you ever danced on the Carnegie Hall stage? I was busy doing other things. :)
- Think Independently - I would love for someone to hold my hand through this whole process and make me a lot of money. Yes my step father has guided me quite nicely, however, he always says to me that I need to do my own research and make my own decisions because he is not perfect and doesn't want to be responsible for any gaines and losses that will occur. Let me take that back. I think he wants to be responsible for just the gains. :)
- You Can Never Go Wrong With Taking A Profit - I love to make money. I am sure we all do but there is never anything wrong with taking a profit no matter what the future holds. That means that if I (hypothetically) make $100 on a stock after selling and the stock goes through the roof I have to remind myself that I cannot be greedy and I will never go wrong with taking a profit... Even if I lose the potential to make more by selling too early.
- Be Patient - My step father made me take a look at thousands of charts from 2001 and 2008. The market took HUGE hits. Both times the market rebounded and went beyond the high point of their respective dropping points. Patiences is tough because the unknown is shadowing the future but the one of the keys to successful investing is in patience. I guess I will see how this concept goes for me over time. In essence I will have to be patient to see how it goes for when I really need to be patient.
3 months in and I am loving all that I am learning. I credit Yakezie for all the wonderful blogs that make me question my financial future, however without my step father I would have felt completely lost. Thank you Ciro for being a great teacher and allowing me the opportunity to learn from you.
If I am missing some points please chime in as it's all about learning.