Hello! So you want to earn money? Now we already have something in common.
(Disclaimer: This article is not about stock analysis nor recommendations. I am talking about very basic investing and at this point business
students should have probably evacuated.)
I am not a business student nor exposed to the
workings of the economy from a young age. In fact, just a couple of
years ago I have no idea what are securities, equities etc. Just seeing
anything about 'shares' or 'stocks' made me shun the article displaying
it. This should give you the idea that I am not a hardened veteran in
the finance world, just like you.
"These
are too difficult to understand" is more or less the thought that
resonates every time I come near anything investment-related. The only
way I know how to grow my money is the 0.05% annual rate that the bank
gives. It wasn't until when I realize my money isn't going to multiply
itself naturally that I braced myself and jumped into the world of
investments.
The
initial implications were terrible. I was hit by technical jargon left
and right, I had absolutely no idea what does 90% of the word in 'help
articles' means. Hearing so much about financial and annual reports, I
proceeded to download one off Singtel. It served no purpose in
furthering my knowledge because the numbers and terms in it made about
as much sense as a 'level 90 paladin tank' is to someone who doesn't
play World of Warcraft - nothing.
I
hope I didn't frighten you too much from the investment world. Many
people my age doesn't do investments, that's understandable. Why would
anyone throw their (or their parents) hard earned money into something
that is virtually nonexistent? Most people my age would either spend
their earnings having fun such as going to clubs, splurging on branded
goods, holidays, and much more. Some of their parents are very wealthy
and can afford their huge expenditure, sure. However, people like me and
pretty sure a vast majority out there, don't.
Given my observations, I would say everyone should invest, but investing isn't for everyone.
Do not misunderstand that I am dissuading anyone from investments, by
'isn't for everyone' I mean that any regular layman who have no
knowledge about investing shouldn't invest blindly. Of course I learned it the hard way, but I wouldn't call my previous actions 'investing'.
What does 'investing' really means? It is a extremely broad word that has many meaning coming from different people and the dictionary defines it as 'expend money with the expectation of achieving a profit or
material result by putting it into financial schemes, shares, or
property, or by using it to develop a commercial venture.'
Basically it means using money to earn money. Lets say that you bet a specific number on roulette, if you're right, the payout is 35:1 - meaning a straight up 3500% return on capital.
"But that's gambling!", many would argue, and they are not wrong. Gambling is a very intrinsic characteristic of investing. By buying a stock or share that you have no idea of - you might be better off playing roulette.
That said, personally I feel that investment shouldn't be gambling. One should only invest when he/she has sufficient understanding about the company/shares that they are buying into. 'Sufficient understanding' in this case, would be referring to the huge amount of fundamental and technical analysis that you should have done prior to spending money in investments. An, perhaps not that professional example would be one I did on Raffles medical (Link).
And a few final tips:
If you have no idea what are EPS, EBITDA, balance sheets, dividends etc. you shouldn't invest.
If you are looking to double your capital within a month or a year, you shouldn't invest.
If you can't accept any losses to your capital, you shouldn't invest.
One must also evaluate their own finances, risk appetite and emotions prior to investing, and do so accordingly.
Thanks for reading and I hope to see you as a successful investor one day.
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