The idea of investing my money in other companies and get a return from it without actually working at the company always seemed really interesting to me but at the same time, I always felt like this is the game of the top of society. Well, turns out, it is not.
In this series of articles, I will walk you through my experience with the stock market. I am planning to publish an article every time something interesting happens with my portfolio. Honestly, I can not say for sure when that will be next time as I am just as new in this world as you. Except if you are not, in this case, I am way newer than you!
Before we begin
Please keep in mind that as I just said, I am nowhere near to be close to an expert. I have no financial education and all I know about investing (which is not a lot), I learnt by doing research on the internet. This means that I am learning as I go. So DON’T EVER takes what I say as advice. I’m writing these articles to document my journey. You can learn from my mistakes and I hope that sometimes you will also be able to get some inspiration from my actions. But until then, don’t forget this. Whatever you want to do with your money, DO YOUR RESEARCH and do it on your own risk. Also, never forget this: Only invest money that you can afford to lose. Doing it the right way, your money is pretty safe in stocks but for this, you have to know how to do it right. Never invest money that your living depends on.
How it started
The idea of starting investing in stocks became real in my head when I received a notification that Revolut now offers an option for stock trading in the free account as well. Before this feature was only available for the paid accounts.
Wait! Don’t leave yet. A lot of people say that Revolut is too limited and lacks a lot of features. And they are right. With Revolut your only option is to tell it that you want to buy X stock for Y amount of money and it is up to your lock whether or not you will receive the stock with the price you wanted to or with a much higher price. You have no option to set a limit for your order. And this is only one of the many useful features. In the same time the number of companies is also limited and you can not buy index funds for example.
Before jumping into it, you should read about all the available brokerage websites out there and decide which one works for you. Most probably I will switch from Revolut to something else but for now, I’m just enjoying the convenience of Revolut.
My First Stock
In the beginning, I had no idea what my strategy will be so I just tried to speculate and bought $55 worth of AL stocks. This money gave me a bit more than 2 shares of Air Lease Corp which is an American Aircraft Lease company. My idea was that during the COVID-19 pandemic aircraft stocks are low so I can win some decent money by investing in them when things get back to normal. (Later I will talk about what I learned about timing in stock trading). A few days later I bought stocks for about the same amount of money of Diamond Offshore Drilling. A company that filed for bankruptcy in a few days so I lost my money on that. Luckily AL went up and before that, I also bought some more of it so I recovered almost all of that money by selling some of it.
The Long Term Strategy
This was the point where I realized that day trading is not for me. Day trading is the concept of making a profit of even the small change of the market by buying and selling stocks on the same day. This strategy requires your full attention, solid knowledge and a big starting budget because $0.01 difference in stock price will not make you too much money if you only had $10 in a stock that costs $100 per share.
Even if I had such a big amount to invest at once and I had the required knowledge to be successful, I don’t think I would like it. It is just not for me. So at this point, I decided to change my plan and go for a long term investment strategy.
So I went ahead and did my research to find the companies that will surely be around in the next decade and started investing in those. My plan is to keep buying stocks every month until eventually my portfolio grows big enough that it starts generating income.
The missing bit
The one and very important thing that I knew about but somehow slipped under my radar is the fact that lots of companies will pay out a small part of their income to the shareholders.
For example, at the end of the last quarter (May 2020) Apple gave out $0.82 per share. So the strategy, in a nutshell, is this. If you have 1 APPL Share you will receive $0.82 every four months (it is not exactly true, because their profit varies from time to time but for the sake of simplicity, let’s assume it does not.). But because you keep investing in APPL every month, after some time you will have 10 apple shares so you will receive $8.2 every four months. You can keep investing in Apple shares (and of course reinvest the received dividends) and at some point, you will have 100 shares and you will receive $82 every four months. If you keep doing this eventually you will end up with a portfolio huge enough to generate a decent passive income.
Of course, you should not put all your money into one company. Even the most solid-looking companies can disappear from the market but if your portfolio is diversified enough you will recover the money lost on that one company. And In case all the companies go bankrupt (given they were all big, solid companies and not startups) than we will have bigger problems than our savings anyways.
Now at the beginning I started only buying stocks that pay a dividend (yes, not all of them do.) But I will for sure also buy ones that do not because I can still make money by selling them after a few years.
It is a lot of money for that return, isn’t it?
Well, not exactly. It may seem unfair to invest $300 000 into a company to get about $3000 a year. But the key here is that the shares you get for your money will not only keep their value but if you are lucky enough, in 10 years they can double their price which means that for 10 years you will get $3000 a year for doing nothing then after 10 years you can sell it for $600 000 which is a decent payback even if you take in consideration the inflation.
Now, keep in mind that this is all theory and just to visualise what you can be capable of by investing your money.
So What Stocks I Bought and How I Choose Them?
I decided to not try to be smarter the big ones out there and simply see what they invest in and somewhat copy it. Of course, I am trying to understand their decision and I only bought companies that I was familiar with but for the beginning, I think copying someone who really knows what they are doing is an acceptable action. I also have some shares of companies that I bought at the beginning out of speculation. I will see in the future if I find it to be worth it investing more into them or not.
My portfolio currently is pretty small but as I said, I will keep investing in it every month so eventually it will grow bigger. This is what I have so far:
- ANF – 11 shares
- APPL – 0.9 shares
- BAC – 1 share
- BA – 0.4 shares
- TSLA – 0.07 shares
- EBAY – 1 share
Why I said the timing is not that important?
At the beginning I was a bit upset because I knew I was a bit late since a lot of companies’ stock prices went up a lot since the crash in march 2020. But I had to realise this has little importance in the long run. You could spend your life waiting for a huge drop in a stock price but you will loose more on those prices going up and you missing out on it because you did not buy them when they were lower.
I did not put much effort into this part of the market so there is nothing interesting to talk about. I have about $100 in BitCoin. But there is an important lesson that I’ve learned. If you invested in something. Stick with it unless it becomes dangerous. I bought some bitcoin a while ago when it was pretty low. It went up a few dollars but nothing huge. But then I wanted to buy some other stock but did not want to put more from my money into it that month so I decided to sell my bitcoin. I had about $5 profit on it so it was not a huge deal but the idea was that the other stock I was going to buy was worth more. Literally the next day, BitCoin went up by more than $500. Since I had a small amount of money invested, this $500 would not mean a hell lot but at the end of the day, it was not worth selling it that fast. Lesson learned.
So far I find this whole world really promising. There is one advice that you can take even from me. Do not do something out of pressure. Think about it before you take action. Remember, as far as the company remains on the market, you can only loose money if you sell your shares. For example, if I bought 100 apple shares in February 2020 when it was around $400 (a bit more but for the simplicity lets say it was 400), I would have spent $40 000 on it but a month later it would worth only $20 000. You could say I lost $20 000 but in reality I did not. I can only loose that money if I sell my shares at a price of $200 per share. But I would not do this out of fear. I would wait and eventually Apple would climb back. For example now in May it is already around $310…
Honestly, I can not say when will be the next time I write about my stock market experience since only telling you how much I invested would not make for good content. So stay tuned for the next one and don’t forget to subscribe to our newsletter so you don’t miss out.