How to trade stock for the first time
This is a little write up about how I came to trade my first stocks and the thinking behind it. From my upbringing to my first PayPal stocks in my Saxo account, I walk you through the steps.
My financial upbringing
To get better in how you manage the money you have to look at how you were brought up. I would personally consider myself to be from the middle class. Not upper or under middle class or whatever new phrase is being thrown around nowadays. To be honest I didn’t even look up how it is defined because there are so many definitions, exceptions, and footnotes. May it will help you to describe what actually happened.
My mother was a single mom and a white-collar worker. Both of my parents did not study. My father died when I was very young. They met at work in a casino. You can argue whether working as a croupier is white-collar work or not as you don’t need a college degree for it. Back in the 80 and nineties, there was good my ey in this type of work until the Internet transformed the gambling industry. My mother actually lived through that cha he and it wasn’t pretty.
Compared to other single moms my mother had quite a bit of disposable income. The big difference was that her working hours ran quite opposite to school times and childcare options. This meant that I had to be a little more independent than others the same age.
My mother passed down the ethos of hard work to me. We seldom went away and she managed to build life insurance and the house which I inherited. She also passed away very young. As we are looking at wealth here I missed out on about sixty years of combined savings from two salaries. My mom always said that she was worried that I was so lazy because to keep the standards I got used to, I would have to work very hard.
In terms of wealth consciousness, my mother passed down a taste for the good things in life as dined out a lot, that gambling and having a little fun are ok as long as you protect your downside. There were some very valuable lessons she didn’t teach me which she didn’t teach me. She still traded her time for money.
Learning from Warren Buffet
I have read the Intelligent Investor, the letters to the shareholders and his biography. At the time I probably was not ready for all of the messages the Oracle from Omaha had to offer. In all fairness, I still struggle a little with his coin-flipping monkeys in the Omaha zoo metaphor. I get the point, but I feel like I am missing some of the subtle things.
The most obvious thing which you will find in any article book or fart about Warren Buffett is his long term approach to stocks. You want to invest In stocks which will make you money in the long run. Short term investing is no investing at all, it is gambling. If you want to beat the market, eat some humble pie, because most people don’t. One of the most famous pieces is buffet’s bet against hedge funds that the S and P 500 will outperform most of them, which he won. In my opinion, this is the obvious stuff. There are also some points which are less obvious, but even more important to make it from the middle class to upper-middle class and beyond.
You need to establish multiple income sources. A first step from being a worker to becoming independently wealthy is to create multiple sources of income. The fancy bunch at Wall Street would call this revenue. If you want to move the classes and break through the glass ceiling this is where you start. Solidify the income sources you currently have and add additional ones to them. In the example for our household that meant:
Having a base salary
Have two jobs in the household
Now that is the obvious stuff. The less obvious, but very impactful stuff is:
Do your tax returns
Move from a job with no paid vacation ton paid vacation
Monetize your hobby
Package your knowledge into online content
One of the ones that many people don’t do because they hate paperwork is their taxes. If you don’t do your tax for ten years it is very likely that you leave at least 10.000 of income on the table. This can vary based on your actual salary, but the bottom line is this is an income source you are leaving on the table.
If any of the people in your household work in a job that does not contribute do pension schemes or does have no paid holidays make it a priority to move them in a job with the same skill set which does. This usually means doing some certifications and jumping through administrative hoops. You invest the same amount of time but make more money.
These two points are optimizing the standard working-class regime. The next two add on top.
Most people have a hobby. If you don’t, get one. Once you have one, think about how to monetize it. We live in the Internet age where it was never easier to make supply and demand meet. You just have to be willing to put yourself out there.
Another way of making money is to package your knowledge for others. Even if you have been working as a packaged for twenty-five years and you think there is nothing exciting about it, believe me you know stuff that others can benefit from based on your experience. Bottle it up and sell it.
Strike with force when the time is right. Yes, the overarching principle of Warren Buffet is value-based investment and minimizing risk. However, there were some opportunities where he and Charlie Munger saw an opportunity in the market, focused their assets and committed to big wins. Sometimes people get the wrong impression that Warren Buffett’s approach of investing is like watching paint dry. Read and pay attention to his biographies. At some key turning points where he made a big killing his eggs were almost all in one basket for a time. Not for long though, as he is smart. As an added bonus this is also one of the main points I took away from “the art of war”. Spread your assets when you are not ready to strike to minimize risk. When you strike, make sure beforehand that you will win the battle throw research and probing and then throw all your resources at it. Disperse afterward.
Become an expert and then work with other people’s assets. Was Warren Buffet a self-starter? Well maybe depending on how you define it. Buffets first step into the market win considerable cash to back him up was based on collecting money from neighbors, friends, and family. They just believed that he knew more about stocks than them and trusted them with this money.
Start early. Warren Buffet started very early with investing. The earlier you start thinking about building wealth the more you will have. Many people only start when they approach their retirement to figure out that they have missed the train. The rich start with heir children at the daily breakfast table.
Cut your losses. Admittedly, that is one that I have to take care of, but that is a story for the other time. At one time Warren Buffet had an entire town against him. Rather than being nice and understanding continuing to ride a dead horse Buffet cur his losses even though that meant that an entire region despised him.
Keep it simple. Buffet is not a fan of complex businesses. The quote that stuck with me was “purchase a business that a ham sandwich could run”. What could that possibly be? One example Buffet makes is a toll bridge on one of the main roads that everyone needs to pass. Sure income that even a ham sandwich could collect. No research Development, minimal Human Resources needed and stable, predictable income streams for decades to come.
Have a steady savings rate. Buffet recommends 20% before any outgoing form your net income. This way your portfolio can grow continuously and you will surge. If there are no savings, you can not take advantage if the opportunities that may come your way.
Hack your life with Tim Ferris
My quest to become superhuman and build a dynasty probably began when my wife gave me Tim Ferris 4 Hour work week book. Again, back then I probably wasn’t ready for the full message. Tim Ferris has been a part of my life ever since. I have listened to his podcast for a long while and especially liked his book tools of titans.
Through him I found some very good books and quotes which I think about here and then to push me forward. I can highly recommend Jocko Willinks book “Extreme ownership”. The quote that stuck with me from this boom is “Discipline is the path to freedom”. The basic point is that if you are disciplined about your routine tasks and don’t screw them up you will have more time to do what you actually want to do.
Another quote I found via Tim is George S. Patton’s “A good plan executed now is better than a perfect plan executed next week”. I recommend listening to his podcast and reading his books to get ahead of the curve.
Empire building 101
To build an empire you have to realize that you can not be everywhere at the same time. You need to have agents who act on your behalf. Every big undertaking knows this.
This is why you have corporate training, culture and team building events. Companies want to create agents who act on their behalf. This is not a new concept.
The Pharaohs made copies of themselves in the form of statues. Augustus depicted himself as a god, the United States plasters their flag wherever they can and the British empire did the same at the height of its power.
If you want to expand and go faster think about how you can create as many copies of yourself as possible which have an impact. The good news in the Internet age is that it was never cheaper to do this. You can write a blog, create a YouTube channel or post on Instagram. Asking as you make sure that your content is helpful and makes people take positive action for themselves your following hopefully will grow. Once you reach celebrity status people just want to be near you for the fact that you are a celebrity.
Before you expand solidify your base. Many empires were built on a strong core which they used to them project their power. The Romans had their Etruscan heartland in which they trained a reliable army. The US created the American way of life and capitalism at home and exported this idea all over the world. So first, solidify your base and then expand. Also try not to overstretch yourself or you end up like Alexander, Adolf or Napoleon.
The empires which were the most stable for the longest allowed for differences to play out in their borders and accepted many different walks of lives.
The wealthy investor
While Warren Buffet introduces the idea of value-based investment with as little transactions as possible there are also other approaches. One of them gets discussed at length by Tyrone Jackson, the self-proclaimed Wealthy investor.
His strategies are mainly based in covered call writing, volatility trading, leaps, and spreads. These are more advanced trading techniques which are often considered risky. That is bad news. The good news is that with these trades you can create regular income for yourself. Buffets value approach creates wealth, but it necessarily liquidity. You need some cash to spend to lot food on the table and Tyrone Jackson teaches his that can be done. With Buffets approach you will wait a long time to reap the benefits of your investments. The wealthy I bestie approach builds a bridge in the midterm.
My experience with bitcoin
I personally have not owned any bitcoins yet. The reports I have gotten are that they were used for ransom payments in ransomware attacks and that one of my coworkers made a considerable profit in them. The returns over a year were enough for me to get interested in trading and think more seriously about it.
My son started to dabble into a simulated account together with this friend. They want to take over the world with their ideas and they might even pull it off. For me, that was the last nudge to finally get my own account.
I read a couple of online articles and blogs about which platform to choose. Saxo Bank came out as one of the platforms which cover all kinds of trades with good service and a little on the expensive side. As an added bo us they are also based in Europe. So, in the end, I opened an account with them and made my first deposit. The customer service is excellent, but unfortunately, as my wallet is small, my dedicated account manager now points me to the support line after I made my first trade
My first trade was in PayPal for seven shares. It is a stock with good top-line revenue growth that does not pay dividends. I even managed to make a small profit on them in a short smith of time. It will be interesting to see how this new chapter in my life will unfold.