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So, you want to learn how to invest in the stock market.
If you are dreaming of risky moves to get some big wins, let start with few things you should know first:
Only use what you can afford to lose.
Before you even get started with the investment strategies I am about to outline, make sure you have a 6-month emergency fund, and a strong portfolio of index funds. If you haven’t set that up yet, you can learn why and how to invest in index funds here.
I allocate 10-20% of my portfolio to high risk investments. If it drops to zero, I have to earn it back again to get back in the game.
For any risky move, make a plan and stick to it.
Investing is mostly about mindset management, which is why this blog focuses so much on how to meditate and chill the f*ck out.
Having a plan will help you stay calm and on course. Look to the plan any time you start to panic, get FOMO, or question what you are doing.
For example “If it goes up X, I will sell X”. You can actually pre-set stocks to buy as they go down and sell as they go up. Plan to sell on the way up, and not on the way down. Think of the ‘red’ color of the down ticker as a STOP sign or red light not to sell.
Cash out your initial investment (and then some) on the first spike.
If at any point you double your money, take your original investment out and let the rest ride. This will give you the peace of mind we need to white knuckle the roller coaster.
Set aside 50% of anything you sell at a profit for taxes.
Remember that any quick windfall you cash out on will incur ‘Income Tax’ instead of ‘Capital Gains Tax’. That means, if you take 100K out of ‘winnings’ you will have to pay *50% tax on that (as opposed to the 20% capital gains tax you incur for holding for a year). This is what gets overnight success stories like lottery winners and famous celebrities into trouble.
*Rough estimate of numbers that vary depending on which state or country you live in.
The dead (and forgetful) do better in the stock market than the living.
This is why I love investing. It really plays to my strength of being lazy and forgetful.
A study from Fidelity found that the best performing investors had either forgotten about their accounts or even crazier—were dead. That’s right. The best stock investors are…dead people.
Again, I wrote a post detailing the absolute minimum you need to learn how to invest in stocks. Once you’ve done this, you can forget about your portfolio altogether, and still profit. Read it. Learn it. Love it.