Multiplying Assets Quick with Stocks

By Miguel Dos Anjos  

The Ideal Platform

                The stock market offers so much potential. By buying stocks we become owners of a corporation. With one stock or even many stocks we are still very small owners, but nonetheless owners of that company.

                To buy the stock we will need an investing account/platform. For somebody just starting it is ideal to find a platform that will not charge high broker fees when buying or selling stocks, such as Robinhood (currently free of broker fees), Merrill Edge (will provide a certain amount of free trades as long as you have above a specific amount average money to invest with them), or another free or cheap platform. The reason to make sure, and study the best platform for you to start investing is to avoid having all your gains obtained in stocks being taken away from you in the form of expensive broker trading fees.

When You Collect

                There are different ways to make money on the stock market. You can buy the stock; let’s say for $100 and with time the company and the stock bought grows in value, and by the time you sell the stock, in this example let’s say it is now worth $115, so resulting in a $15 profit.

Another way to make money on the stock market is to buy stocks that pay dividends. The company will pay you a percentage of their profits. Usually as the company grows the dividend payment grows as well and similarly if the company start facing harder times or for any other reason decides to: may decrease or stop paying dividends.

Trading Types

                All stock strategies will usually vary from 3 primary/different approaches:

1-      Day Trading:

Investors will buy stocks and hold it for very short amounts of time, a day, an hour or even minutes, sell it aiming at a small quick profit.

2-      Swing Trading:

A swing trader will usually buy a stock and hold it for 2 to 6 days, and make the profit based on knowledge of an event that will happen, such as a release of a new great product, resulting in a positive outcome that will grow that stock.

3-      Long Term Buying:

This is best fit for most investors because we can buy the stock and hold it for 1 or 10 years allowing it time to grow.

Stock Investing Rules

                Warren Buffett’s, also known as the world greatest investor multiple times has mentioned these investing rules:

      -          Invest on a company you know and understand.

-          Durable with a competitive advantage.

-          With management that have integrity and talent.

-          And a price that makes sense.

              A couple of tools that are out there to help us are companies’ statements, annual reports 
and companies’ strategies.

       No matter how good a company is, it does not have an infinite value amount to be paid for. The secret is to buy good companies on sale, when the market is down, or an event has brought such a company value down, but due to our research we know that that company will grow back. Identifying good companies earlier in their life stages allows us to capitalize more. It’s very hard to make money on a company that is already all the way in the top in value with no more room for growth.

Stock Market Current Situation

                As I’m writing this article, April 2019. This is a very specific time to be in, because every 5 to 7 years average a certain degree of recession hits the market. When this happens many companies die out and many people lose lots of money. Recessions reveal the strongest and better prepared companies out there. At this point an opportunity opens up for those who were able to see it coming, and prepared in advance to make lots, and lots of money.  

The last recession happened in 2008, and from 2009 to 2019 we have been enjoying this bull (growth) market for 10 years. It is not a question of “if”, but “when” the next recession will hit, but eventually it will hit. This is why a great approach is to invest in the market and stay in it for long run, combining it with a retirement account is ideal because it will allow TIME for investments to grow and compound towards an abundant retirement years.

Develop a Short List of Companies You Understand

       Develop a short list of 6 to 12 companies you like and fully understand.  Since we know a recession is late due this is a good time to sit in large amounts of cash.

             Wait for these specific companies to go on sale, so you can buy low and sell high, maximizing profit. 

How Long to Become a Pro Trader

       If you are just starting investing in the stock market, you may ask: “How long it may take to learn all needed to never make mistakes?” The answer to that is; that no one will ever know everything but the secret is to start investing a small amounts to practice without running the risk of have big losses. Making an investment of a few hundred dollars that goes bad will not hurt as much as a bad investment of a large amount.

       As time passes by (months, years) increase the investing amount, because if you never start, you will never learn what a stock looks on sale, and will miss out when the opportunity arises not knowing what a good opportunity looks like. Also, you need to know how you will behave once you own a stock: the market fluctuates, so if you are not used to it, and freak out in a day that it drops, and sell your stocks you may lose money, and feel horrible when the next day the market picks back up. The key is to accumulate knowledge of the market and those strong, long lasting companies to make good decisions.

Don’t Want or Have the Time to Put in the Work

                In case you do not want to put in the time or if you do not trust yourself enough, another solution is to invest in a 401k (retirement account) or an Index fund, such as the S&P500. This means you would be riding the market being invested in the top 500 US companies, which, average grows 8-9% percent a year, and not trying to pick the top companies out there.

                Another approach is to combine both worlds: (1) investing long term inside a (2) retirement account (IRA or Roth IRA), and still pick the winning companies that you know have the strongest long term growth. Also, any money made inside a Roth IRA account is tax free, but, for the most part you can only access it at age 59 and half.

Our video on this subject: Multiplying assets quick with stocks!

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