One of the first things you learn about personal finance is that there are three keys to financial success: save more than you spend, live by a budget, and invest. In this post I’m going to talk about investing, in particular, how investing in the stock market can lead to your future financial success.
Why Gamble?
Yes, investing in the stock market can feel kind of like putting down money on a table in Las Vegas. This is because, like the games in Vegas, the player has little control over the game’s outcome. You can guess what you think will happen and if you’re right, you profit and if you’re wrong you don’t. The primary difference is that, unlike Vegas, the more you learn about investing and following the market, the sounder your investments will be. What’s more, over a long-enough timeline, “letting it ride” actually can help you earn back or even profit from your initial investment.
Where to Start?
There is a ton of information out there about how to get started with stock market investing. Some insist that the best way to get started is to hire a financial adviser and invest in whatever she tells you to. Some people prefer taking lessons from millionaire penny stock traders. Still others say to buy a few shares of your favorite company via an independent trading app. We say that the best way to get started investing in stocks is to start with binary options.
Binary options are short-term investments you make not in a company itself but in the market’s behavior. For example, let’s say you think that a company’s stock price will rise, so you put your money where your mouth is. If the stock price does rise, you get paid. If it falls, you lose your investment. It’s a good way to learn the ins and outs of the market and how it behaves.
Moving On Up
Once you’ve gotten your feet wet with a few binary trades, you can start buying actual shares of companies. For many new investors, their first instinct is to either put all of their money into a company that is popular (like Apple, Google, Facebook) or to base their initial investment on the stock price itself–and go with what they can afford.
If you want your stocks to perform well, though, it is better to combine the two: invest in companies that you know will do well and that are providing something valuable to the marketplace. But instead of investing in the market brand, invest in the companies that provide them with the goods and services those brands need to stay alive. For example, instead of investing in Google, invest in the company that makes the physical servers that Google uses. These shares are usually less expensive and are not as likely to fluctuate wildly the way a popular brand’s shares will.
Play Your Cards Right
If you play your cards right and learn to tune into the market, it’s possible to not just create a nice nest-egg for your future retirement but to earn a current full time living. It’s true! While not easy, for many people it is possible to fund a whole life simply by trading stocks well.
For example, Tim Grittani turned his savings of $1500 into $1 million within a few years. He did this by trading penny stocks. This technique is not, however, for the faint of heart. There’s a learning curve — and it basically involves treating stock trading like a full-time job. Grittani spent time in front of his computer, monitoring the market and learning how to buy and sell at the right time. It obviously paid off for him and if you feel safe about quitting your day job, this might work out for you, too.
There are more of these stories out there about people who literally used the money they had to earn more money. Before you jump into the deep end with day trading, however, make sure you know the basics!
Photo Credit: Dazzy D
A great way to motivate yourself to invest today is understanding compound interest…
The sooner you start investing, the better off you’ll be. It’s current pain (saving) vs. future pleasure. What you learn through investing will benefit many areas of your life.