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How to start investing

Now that you’ve made up your mind. Let’s have a look at how investing really works. It’s actually very easy. There are only two ways you should invest:

  • Active
  • Passive

An active investor handpicks stocks and other assets. That requires you to have in-depth knowledge about companies, the market they operate in and their competitors. You should at least handpick twenty stocks from different markets (For example, technology and food). To gain the knowledge to make confident decisions will take you at least a few years learning how to read all the financials of companies and have a good understanding of what you are looking for in a company.

For 99.5% of the people, becoming an active investor is not recommendable. Unless you are really motivated to dive into the numbers and everything that comes with it.  Let’s be honest, you are probably only in for the profits and not for spending twenty hours a week making it a second job. Besides, do you even have the time to do this?

That leaves you the passive approach. With the passive approach you buy some ETFs or index funds, buy shares each month and let it run for twenty or thirty years. You hardly have to do anything. Maybe rebalance once in a while but you don’t need to look at any balance sheet or income statement. This approach is recommended for most people. The fact is, even 90%+ of professional institutions with many decades of experience can’t outperform an ETF tracking the S&P 500 after fifteen years. If they can't even beat a simple index tracker, what are the chances you will?

But there are more ways to invest. First you need to find out what you want. To give you an in-depth overview about everything related to investing I created two in-depth guides. Both are just as long as this guide so you got some reading to do.

In the first guide you’ll start with the basics and find out what kind of investor you want to be. In the second guide I'll go in-depth about all different products, terms and things you need to know. Take your time to read them both. Also, the guides will have links to must read books about investing, personal finances and building a business. Those are optional sources you can use to expand your knowledge.

I also created an in-depth guide about day trading. Be aware that day trading also requires at least one or two years of full time commitment.


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