Today I am going to tell you the best way to invest your first $1000 or $10,000 in the stock market and grow your wealth.
Hi, I am Henrikh and I will go over the best possible options to invest your first small capital, but before we start, please make sure I am not a financial adviser and I don’t do investment recommendations. This article is all about education.
Ok, let’s start.
First and foremost, to be a good investor you must spend enough time on your education, otherwise, I almost guarantee you will fail like the first trial of riding a bicycle. You can’t read how to ride a bicycle for 10 years and then try and succeed. No way. You have to do real things before you succeed. I will try to guide you to make minimal to zero wrong decisions for investing your first capital.
1. Invest for the Long Term.
Don’t even try to do some short-term trades, because either you will fail or you will win and then fail harder. Why? Because short term trading is only for professionals, who have enough resources, technology, network and experience to handle the emotions. Also, even 90% percent of those professionals are not successful. So to be successful you’d better invest in the long term and don’t panic when the market fluctuates, because there is no straight line in the market in the long term, you will have many ups and downs. And as there will be down years, you will think of selling your investments, which will lead to a loss. So make sure you have invested the money you are not going to touch for ten years or more and there will be no need to withdraw from your portfolio for your personal expenses.
2. Don’t ask for investment advice.
If you think you are not professional, but you know a professional who can tell you which stocks to invest in, run the farther you can from that professional investor. A professional investor takes into consideration hundreds of factors for his decisions, which can easily not work for you. It can be portfolio management, risk allocation, hedging against the other positions, risk tolerance, future plans and much more. For example, I jumped into a FB stock at a cost basis of $167, but I am willing to invest $150 if the price drops and $120 if the price drops further and maybe I will invest double the size if the price drops under $100 and I will have an average cost basis of $110 or $120, which can become a good investment for 10 years. And I can’t give the advice to invest in Facebook at $167 to a guy who only has that first $167. So there is no good stock to invest and that’s it. There are too many factors you must take into consideration. As Robert Kiyosaki says: “There is no good investment, there is a good investor”. And when someone asks Robert Kiyosaki: “Please tell me a good investment I do now.”, he replies: “But are you a good investor?”
3. Invest in Index Funds (BUT).
But choose the right time and way to invest otherwise you will end up reaching the break-even point in 20 years as we had it a few times in our history. Yes, the market always goes up in the long run, but that long run is about 50 years or 100 years. There have been a few cases where the market went nearly nowhere for 10-30 years within the last century. Now, in 2020 it seems we are having another opportunity to jump into Index Funds. I think the best Index Fund one can jump in is the SPY ETF, which tracks the base S&P 500, or IWM for Russell 2000. If I didn’t want to do an individual stock analysis and didn't want to go deep in investing, researching, analyzing companies, I definitely would invest in Index Funds. So you either work on yourself, spend enough time to get skilled in this aspect, or you just invest in index funds. Of course, you can have some 5-10% of your portfolio in precious metals for protection from an economic downturn, but you better invest in funds if you don’t want to go deep in investing. But start your fund investment when the market is not at high levels and be aggressive when the market crashes. To know that the market is not priced high, make sure the total P/E ratio is not over 20. For more information read Robert Shiller’s book called “Irrational Exuberance”.
4. Invest in tranches.
There is a big difference between investing with tranches and dollar-cost averaging. The main idea of dollar-cost averaging is that you put a certain amount of money, for example monthly, and you don’t care what the price is. It’s up - you invest, it’s down - you invest. I don’t like that approach and never thought it was wise. Instead, I have a better method, which always worked for me well enough. It is investing with tranches depending on the price. For example, you need to deposit $1000 in silver, invest $200 first, if the price goes down, invest another $200, it goes down again, invest your next $200 and so on. If you think you are investing in the correct thing, you should be happy when the price goes down, because you will invest more and get it averaged at a better price. So if it crashes a lot, you even can invest 2 tranches together to double invest at a great price and deduct your average cost basis vastly. The only and the only problem of this method is when you start investing and the price never goes down. Believe me, there will be too few cases in your life that you will pick the bottom and the price will go only up since you invested. And even if that happens, you can spend your tranches on other investment tools if you are sure that those prices will never come back. Also, let the biggest problem of your investing be less profit. Let that one investment bring you little profit. There are a bunch of new opportunities every day, believe me.
Today I am going to tell you the best way to invest your first $1000 or $10,000 in the stock market and grow your wealth.
Hi, I am Henrikh and I will go over the best possible options to invest your first small capital, but before we start, please make sure I am not a financial adviser and I don’t do investment recommendations. This article is all about education.
Ok, let’s start.
First and foremost, to be a good investor you must spend enough time on your education, otherwise, I almost guarantee you will fail like the first trial of riding a bicycle. You can’t read how to ride a bicycle for 10 years and then try and succeed. No way. You have to do real things before you succeed. I will try to guide you to make minimal to zero wrong decisions for investing your first capital.
1. Invest for the Long Term.
Don’t even try to do some short-term trades, because either you will fail or you will win and then fail harder. Why? Because short term trading is only for professionals, who have enough resources, technology, network and experience to handle the emotions. Also, even 90% percent of those professionals are not successful. So to be successful you’d better invest in the long term and don’t panic when the market fluctuates, because there is no straight line in the market in the long term, you will have many ups and downs. And as there will be down years, you will think of selling your investments, which will lead to a loss. So make sure you have invested the money you are not going to touch for ten years or more and there will be no need to withdraw from your portfolio for your personal expenses.
2. Don’t ask for investment advice.
If you think you are not professional, but you know a professional who can tell you which stocks to invest in, run the farther you can from that professional investor. A professional investor takes into consideration hundreds of factors for his decisions, which can easily not work for you. It can be portfolio management, risk allocation, hedging against the other positions, risk tolerance, future plans and much more. For example, I jumped into a FB stock at a cost basis of $167, but I am willing to invest $150 if the price drops and $120 if the price drops further and maybe I will invest double the size if the price drops under $100 and I will have an average cost basis of $110 or $120, which can become a good investment for 10 years. And I can’t give the advice to invest in Facebook at $167 to a guy who only has that first $167. So there is no good stock to invest and that’s it. There are too many factors you must take into consideration. As Robert Kiyosaki says: “There is no good investment, there is a good investor”. And when someone asks Robert Kiyosaki: “Please tell me a good investment I do now.”, he replies: “But are you a good investor?”
3. Invest in Index Funds (BUT).
But choose the right time and way to invest otherwise you will end up reaching the break-even point in 20 years as we had it a few times in our history. Yes, the market always goes up in the long run, but that long run is about 50 years or 100 years. There have been a few cases where the market went nearly nowhere for 10-30 years within the last century. Now, in 2020 it seems we are having another opportunity to jump into Index Funds. I think the best Index Fund one can jump in is the SPY ETF, which tracks the base S&P 500, or IWM for Russell 2000. If I didn’t want to do an individual stock analysis and didn't want to go deep in investing, researching, analyzing companies, I definitely would invest in Index Funds. So you either work on yourself, spend enough time to get skilled in this aspect, or you just invest in index funds. Of course, you can have some 5-10% of your portfolio in precious metals for protection from an economic downturn, but you better invest in funds if you don’t want to go deep in investing. But start your fund investment when the market is not at high levels and be aggressive when the market crashes. To know that the market is not priced high, make sure the total P/E ratio is not over 20. For more information read Robert Shiller’s book called “Irrational Exuberance”.
4. Invest in tranches.
There is a big difference between investing with tranches and dollar-cost averaging. The main idea of dollar-cost averaging is that you put a certain amount of money, for example monthly, and you don’t care what the price is. It’s up - you invest, it’s down - you invest. I don’t like that approach and never thought it was wise. Instead, I have a better method, which always worked for me well enough. It is investing with tranches depending on the price. For example, you need to deposit $1000 in silver, invest $200 first, if the price goes down, invest another $200, it goes down again, invest your next $200 and so on. If you think you are investing in the correct thing, you should be happy when the price goes down, because you will invest more and get it averaged at a better price. So if it crashes a lot, you even can invest 2 tranches together to double invest at a great price and deduct your average cost basis vastly. The only and the only problem of this method is when you start investing and the price never goes down. Believe me, there will be too few cases in your life that you will pick the bottom and the price will go only up since you invested. And even if that happens, you can spend your tranches on other investment tools if you are sure that those prices will never come back. Also, let the biggest problem of your investing be less profit. Let that one investment bring you little profit. There are a bunch of new opportunities every day, believe me.
