Investing is fun when the markets are going up!
Disclaimer: I usually am the first person to realize that I don't know what I'm talking about, and it might not be so obvious to others at first glance that my advice is not solid gold all the time. As such I will put in bold letters here: INVEST IN SINGLE STOCKS BECAUSE YOU WANT TO AND YOU FEEL YOU ARE READY, not because somebody tells you to do it.
So here I am 2 weeks from opening my Fidelity account and plopping a few dollars into it. I figured it was finally time to start investing in individual stocks because I felt like I was ready and I had a few friends telling me they were making a killing on this that or the other thing.
I knew I could spare some cash because I ran my budget and my doomsday scenarios like all OCD people would do, and instead of buying a car again or something equally de-preciative and time consuming, I decided I would get my feet wet in the market. As it turns out, I also got my brain wet too as there is quite a lot of intimidating mumbo jumbo that goes on in your head when you are throwing a pile of money into a new account and wondering if you will ever see it again. Of course this seemingly high risk investment of single stocks was intimidating to tackle as a first timer and learning Fidelity's interface was also a hurdle or two to make sure I didn't click the wrong button or something and blow my whole wad by accident!
So how did I do? Why am I writing a financial article to explain my advances when I have only had an account for 2 weeks to the day? I'll tell you why:
I made 6.8% in 10 business days
Am I the new Buffet? Unlikely. Am I a genius? I think so! But not very probable to be honest. I just listened to some people who I thought were smart and did what they said to do. My gut feeling is that since I am in this for a longer term that these gains will probably normalize into something resembling sanity, because if it were this easy to make money then it would be illegal, so it has to be very unlikely that this will remain consistent.
The point of this article is to inform readers that once they have done the things in the following list, they should feel free to have some fun in the market with a pittance of money that they absolutely do not need to have in the foreseeable future, even if they did lose their job. Without further adieu, a list of things to do before deploying capital on a risky investment:
- Have a 6 month buffer of living expenses in cash just in case you lose your job or something else bad happens.
- Have other highly diversified investments like robo-adviser stuff in play that dwarf what you are planning to invest in single stocks.
- I personally would recommend saving for and purchasing a primary residence before investing in stocks, but that's just me.
Also, you may want to be prepared to lose all of what you are investing. It puts you in a good spot to appreciate gains and not to care about losses. After all, you already wrote off the money mentally so why worry about it?
If I am to maintain personal honesty at this point I would need to disclose this as well: I am only interested in this as much as I am because it is giving me solid return on investment (ROI.) I am certainly not used to getting 177% APR on any other thing, except maybe my flips. If this didn't work at all or I just immediately lost money, I probably would not write about it and would keep pushing the safer and more trustworthy investment methods discussed in the past like real estate for example. Anyways, if you feel fiesty then take your investing to the next level, and why not start while things are going up so you can cruise with the wind at your back?