Final steps

In this chapter I’ll go over all the things we talked about in all previous chapters. Investing is not particularly difficult, it's the insane amount of information that makes it hard. Who has time to read hundreds of pages and dozens of books to finally understand how the stock and and other financial markets work? And even if you did read all of them, that does not mean you’ll be successful. The following list will be in chronological order.

33.1. Personal finances

Money management is crucial when investing. Poorly managed personal finances will result in making the wrong decisions. Let’s say you found a very good investment opportunity and you consistently buy shares but are forced to sell them because something happened in your personal life. That would be disastrous for your investment although your health always comes first.

When investing in stocks, your money's gone for the next ten years (when you are value investing). You can’t take it out. So you have to make sure your personal finances are on par with this mindset. If you already know your car might break down in the next few months you have to make sure you don’t invest this money only to take it out to fix the car. This might sound obvious but most people forget the basics.

33.2. What is your goal?

Before you start investing you should have a goal. Do you want to be rich? Do you want some extra income besides your day job? Do you want to stop working and living off your investments or dividends sooner then later? Every single goal needs a specific plan. Maybe you just want some extra income when you retire. Every plan starts with a specific goal. The more specific your goal, the better plan you can make and the more successful you’ll be.

33.3. What kind of investor do you want to be?

Do you want to stare at the chart all day? Do you want to dive into balance sheets or income statements? Do you want to be actively trading or rather have a zero effort approach? Day trading or value investing are two completely different things. Each has their own risks and rewards. If your goal is becoming rich through investing, you already know that the zero effort approach won’t cut it. Unless you have a very high income. You have to make sure that the type of investor you want to be fits your goal.

33.4. Investing time

Whatever path you choose, you have to invest time. There is no other way. How much time you want to invest is up to you. You can start reading books, watching youtube videos or reading guides like this one. As time is the most valuable thing in the entire world, I’m here to help.

My trading tools are here to help you find investing or trading opportunities without having to do all the research yourself. This can save you tremendous amounts of time. 

An aggressive investor needs to have strong controls over their emotions and need to invest the most time. While a zero effort investor can let things run on autopilot without having to worry too much. 

33.5. Creating a portfolio

Now that you have your personal finances in check, have a clear goal and know what kind of investor you want to be it’s time to create a portfolio. In this guide we talked about stocks, bonds and most common securities you can find in the stock market. I also showed a few fictional portfolio’s. While there is no one stopping you from creating your own portfolio, you should consider your age and weigh out risky vs more safe investments to balance your portfolio. Also, if you already know you can panic pretty quickly when it comes to finances and seeing red numbers, then it would be better to not invest in risky investments too much regardless of your age. 

33.6. Picking a broker and managing fees

Fees and other costs have a huge impact on your investments. This can cost you tens of thousands of dollars in the long run. Don’t be fooled that low fees rates like 1% are low. You have to add up inflation, taxes, transaction costs and all other fees. Broker fees and spreads can have huge differences between brokers. Your broker or exchange should fit your needs.

33.7. Investing strategies

Once you have everything setup it’s time to buy your first stocks, bonds or ETF. While buying an ETF does not require any specific plan, other securities might need a specific strategy. In troubling world wide events like covid, you might want to have to cash on the side ready to buy market pullbacks. Inflation is rising to all time highs (2022) which will cause interest rates to rise. Interest rate risk is rising. It can also be a strategic opportunity to buy stocks from pharmaceutical industries as vaccines will dominate covid for the next years. While airline companies are still suffering. Just note that only looking at fundamentals is not always enough.

33.8. Monitoring and rebalancing your personal finances and investments

An ongoing step when investing is monitoring your portfolio and making changes when needed. This is very important when picking your own stocks and much less important when you pick a zero effort approach. It’s like mowing your grass. You can leave it unattended for a while but you have to mowe it sooner or later if you want to prevent a disaster. 

For enterprising stocks this means continually researching and balancing your portfolio on a yearly basis. But don’t fall into the trap of balancing too much. Everytime you buy and sell stocks you have to pay fees or other costs.



Chapters: The Ultimate Investing Guide

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