A few years ago I visited the Old Town School of Folk Music for a Meshell Ndegeocello concert. It was a crisp fall night and the breeze was subtle, so we ventured for a walk after the show to find a quick, cheap bite to eat.
We met her, accidentally, in the street. Wool hat, plaid shirt, army-colored boots. There wasn’t a crowd around her or even any bodyguards. She must’ve wanted the same thing we did: a little fresh air and some food.
We hadn’t spoken a word for most of her show. We watched the performance in stunned silence: mesmerized, captivated. We giggled for a second nervously, debating whether to ask for a picture. I could’ve touched her arm!
Passersby who’d observed the exchange whispered to each other with confused faces, “who is she?”
What?! The struggle.
You don’t know what you don’t know, and what you don’t know matters.
This week was a mixed bag. I did more research on investing and started making lists of unfamiliar terms.
Whenever I encounter a problem that needs a solution, I do one of three things:
- I organize the parts that make sense, the pieces I can control. Usually this looks like a list, a chart, a spreadsheet, or a new filing system.
- I evaluate what’s working well via research, data, statistics, conversations with experts, anecdotal info, etc.
- I organize the parts that don’t make sense (the parts I can’t control). These two aren’t necessarily the same thing. Then I figure out a) who or what controls those parts, and b) whether those parties, factions, or structures can be moved.
I started by making a list of the terms I need to research:
- asset classes
- dollar cost averaging
- Class C and Class A stocks
- short sell
- gross margin
- penny stocks
- blue chip stock
- SEC filings
Then I created a list of questions:
- If you own shares of a company that offers dividends, but then you sell your shares of that stock, will you still receive dividends for the period when you owned the stock?
- Where can you find a company’s income statements and balance sheets?
- What’s the best strategy for selling your shares of a stock, i.e. when is it most advantageous?
- Do you need special knowledge to become a day trader? Can you day trade on Robinhood, or is it best to go through a brokerage firm?
- Best case scenario, what’s a realistic amount that an inexperienced investor can potentially earn in their first year of investing?
Then I summarized the tips from the resources I’ve been reviewing:
- Diversify your investment portfolio to minimize potential losses
- Decide what kind of investor you want to be. A day trader? Someone who puts money in and just leaves it there? A penny stock trader?
- Invest less than two-thirds of your funds in your brokerage account. Leave one-third in case your stock falls.
- Read the quarterly reports, annual reports, investor relations page, etc. for the stocks you invest in (or plan to invest in).
- Set a fixed amount that you plan to invest each quarter or each year.
- Read The Intelligent Investor by Benjamin Graham
- Research/study best practices of prominent investors
- To diversify your portfolio, plan to invest in no more than 5-7 stocks TOTAL (as a beginner)
- Decide what your investing goals are. Pay off debt? Earn additional income? Save for retirement?
The week has been kind. In early May I invested $50 into my Robinhood account and purchased two shares of Ford stock. Last week, I put in $200 more and bought one share of Netflix stock. I plan to keep them for the long haul. In the meantime, I’ll continue to research best practices.
The month has been up and down but as of today with my three shares (2 Ford, 1 Netflix), I’m up $3.15. SUCCESS!
What tips would you recommend for a brand new investor?
Have you ever missed an opportunity because you didn’t know what you didn’t know?