I’m NOT a stocks expert!
What a fine way to start of a post, and persuade people to keep reading 🙂
But to be honest, as with every other investment, you should do your own research, and make your own decisions.
As most of us, I only have access to delayed or second hand information.
I cant act on first hand knowledge, of for an example upcoming financial reports, or new approved products.
When i learn about it from online media, or the news, the professional are already way ahead.
Therefore i have decided to stick to a passive strategy, in my way to achieving FIRE.
I will invest rarely, and stick to investing my money into well renowned companies.
Make sure to check out how i’m doing here
When you buy stocks in a specific company, you buy a tiny bit of that company(at least in my case)
My strategy is to invest in well renowned companies, that hopefully should do fine in good times, and be able to still make money in bad times.
There are of course no guarantees, but Banks, pharmaceutical, insurance companies and food producers are all sectors that people will still need, even when the economy is trough a rough time.
I will by buying stocks in companies that pay out returns to their shareholders.
That means I will a small share of the profit when the companies i’m invested in makes good results.
The amount they pay out will “leave” the company, and therefore the stock wont rise as much in valuation, as if the company kept the money.
ETF’s – Index funds
As one of the worlds richest’s Warren Buffet says, most people should stick to ETF’s, where you invest in indexes.
Then you wont be tied up to single stocks, but to the stock market in general.
Index funds are specialist, that invest your money for you.
They invest in a wide range of companies, so you aren’t exposed to one company doing exceptionally good or bad.
The amount you have invested will follow the general world economy.
There are both active and passive index funds.
Active ones are trading often, and have higher yearly costs, where passive doesn’t sell or buy stocks that often, and therefore have lower yearly costs.
Stock market – ups and downs
An overview of the Dow Jones index from 1918 to 2018
In general the stock market has been going up and down over the last 100 years.
If the market continues as it has been doing, after correction or crashes, the market will rise again to new heights.
We have dropped over 10% in valuation in 2018, but it is barely visible on the chart.
Dollar cost averaging
I will be using dollar cost averaging, particularly when buying ETF’s.
That means, i buy for a fixed amount every month, no matter the price of the stocks.
In theory, that should mean, that just like the above picture of the stock market, some months I will buy at a high price, and some months at a low price.
But over a long period, I will have been buying at an average price, and wont risk having bought only at the all time high.