What I learned in my First Year trading in the Stock Market
Since the pandemic started a year ago, I realized that relying on a full-time job as my only source of income will not get me to the financial freedom I envision. Many people lost their jobs or their company did wage cuts. But their bills and mortgages didn’t get lower or go away. It was a frustrating year for most financially, but with struggle comes opportunity! This is why I was compelled to start investing. It’s one of the best thing happened in 2020 for me while I see my account grow weekly and monthly. With the Gamestop and WallStreetBets saga going viral the average joe should at least get few takeaways from it: Retail traders have more power and access to investing in stocks (or should I say STONKS) than ever before. Also that keeping your money sitting in a savings account isn’t growing your income how the stock market can.
Just to briefly sum up my results since I started in March last year. I’ve increased my portfolio by 151.01%, I have stock in 43 companies, 4 crypto currencies and can option trade (level 2). Disclaimer before you read further! I’m not a financial advisor, just a creative guy that had a lot of time on his hands to watch a bunch of YouTube videos to get a pretty decent grasp on how the stock market works. Below is some of the things I learned along the way from dabbling in the stock market for one year. Invest wisely everyone!
You don’t need a large sum of money or be an expert to start
I feel like this is the biggest misconception of the stock market, because for a long time I thought the same. For me I started off small and still continue to do small bets. I’d suggest to do the same and spread your cash reserve into multiple companies instead of just one. Invest $20 here, $50 in another company, $100 there. Just a good rule of thumb is to try to get at least 10 stocks so the gains will amount to more incrementally. However it’s totally cool to do the opposite if it’s an established company and do fractional shares. Owning 17% of one stock of Amazon, Tesla or Berkshire Hathaway is better than none!
You also don’t need to be this Wolf of Wall Street expert either to begin. Start off by investing in industries you’re passionate about. If you’re big on the environment then companies in the EV (Electric Vehicle) and Solar Power would be good to research. Think about the industry you work in as a place to start. I’m sure if you work in Construction you’re aware of the big conglomerates to invest in like John Deere (DE), Caterpillar (CAT), Home Depot (HD), Lowes (LOW).
Before, during and after pandemic
The market crashing in 2020 around this time was one of the main reasons I took investing seriously. Because I was well aware that most companies stock prices were going to be at all time lows. Perfect time to buy! This has been an ongoing strategy where I’ll lookup a company and flip back and forth from their 1-year to 5-year stock price chart to see how they were doing pre-pandemic. Most stocks are still half off. For example Boeing (BA) in 2019 early 2020 before the crash was trading around an average of $370 per stock. Now they’re hovering around $210. A company that huge who plays such a large role in the global economy will not fail as the government would surely bail them out. So the optimistic theory is that once the pandemic is close to being eradicated they’ll go back up to their normal stock price or maybe even higher! A slew of people eager to travel again. Which then you could gain double in your investment. Here’s a list of other stocks that are close to half off: Wells Fargo (WFC), United Airlines (UAL), Carnival Cruise (CCL), Norwegian Cruise Line (NCLH), British Petroleum (BP), Proshares Ultra Bloomberg Crude Oil (UCO)
Other things to consider before and after you buy
Here are some other things you should consider before purchasing some stocks in a company. How does there yearly earnings look? If you see that they’re in an upwards trajectory and beating expected earnings it’s a good sign to buy. On the Robinhood app (I know I should’ve deleted the app after the WSB’s fiasco, still looking to see what other app is better) you can also check the Analyst Ratings to see what experts are saying what to do with the stock. Either buy, hold or sell with percentages shown. If more than 60% of the analysts say buy then you should too!
Another thing that’s kept me informed on Robinhood is scrolling through the news. It’s convenient because you can just skim through the headlines and be able to look at what companies are tagged in the story. It’s a great way to get digestible updates on the economy and Wall Street Journal articles are free to read. Often I will skim through an article and make mental notes of the key details they’re covering. I also dig farther, if it’s a story on how Telsa’s (TSLA) production is going to ramp up for Q4 then I’ll look into other companies that go into production like lithium batteries. Then consider if it’s a good time invest in companies like Lithium Americas (LAC) and Livent (LTHM). Which I think it is, just my opinion!
Other numbers to keep in mind are a company’s P/E Ratio. Which is the price-earnings ratio, it’s the ratio of a company’s share price to the company’s earnings per share. The ratio is used for valuing companies and to find out whether they are overvalued or undervalued. They say a P/E of 13pts and up is great so be on the lookout for that. Their 52 week high/low is another indicator to checkout to see where their current stock price is comparably. Another way you can earn is by investing in companies that have a dividend yield. The dividend yield or dividend-price ratio of a share is the dividend per share, divided by the price per share. It is also a company’s total annual dividend payments divided by its market capitalization, assuming the number of shares is constant. Or in plain english it’s where companies will pay you quarterly for how much stock you own. It’s a small payout…depending on how much stock you own, but a nice incentive to be paid for no effort other than hitting the buy button. A good divi rate is anything 2% and up, but really any company that has one is worth considering. Here’s a list of companies that have their divi over 2%: Coca-Cola (KO), Wells Fargo (WFC), AT&T (T), Cracker Barrel (CBRL), United Parcel Service (UPS), AbbVie (ABBV).
On a final note here are a few philosophical views that have resonated with me after a year in the stock market. Don’t trade with emotions. In theory you only lose your money when you sell your stocks at a loss. As the founder of Barstool Sports says below, who happened to start trading the same time I did last year.
“I do overall believe if you just hold and you have the time to hold, stocks will always go up.” ~ David Portnoy founder of Barstool Sports
From the Drake meme above, always continue to diversify your portfolio. It’s best to start off with stocks in companies where you know the industry. But over time make sure to invest in different sectors like tech, pharma, energy, auto, food, travel, entertainment, etc. That way when one sector of the market is on a downward trend, the rest of your portfolio still remains level. Finally one more note, DOGECOIN TO THE MOON!
*If you’re interested in learning more and have Facebook Messenger, leave a comment with your full name and I’ll add you to my group chat where we talk about stocks, trends, tutorials and memes weekly!*
