I am not an Expert
But I have had limited training and have invested in the markets for about 8 years. My recommendation is to find some excess money and invest in the market. Here is how I learned, and how I now invest along with some of what I feel were my mistakes.
Training
I took courses on investing from Investools, which at the time was a subsidiary of TD Ameritrade. These classes focused on how to invest in options and how to read and interpret charts and indicators.
The straight investools website uses search techniques to evaluate sectors to find the best stocks in the best sectors to create a list of stocks to invest. Using three major technical indicators, MACD, Stochastic, and Moving Average. If all three indicators are green, it is time to buy. With each buy the user creates rules which cause the stock to automatically sell if it immediately goes negative. I also learned how to size and create a buy order based on limiting risk.
Overtime, I adjusted my techniques. I started using a fourth technical, on balance volume which the instructor felt was predictive and not trailing. Divergency is an tool to predict future strength in a stock.
I also began learning how to train options. Advanced options trades are used to create trades which are likely to succeed but will give little return. My experience with options was not successful. I was able create many trades which succeeded, ended with many little winners, and a few big losers. Sizing of the trades based on the size of my portfolio made it that trade charges eat up to much of my wins. I lost money…
There will be loses…
Interesting point. If you trade stocks or options, you will create some trades which lose money. There will downturns in the market where entire portfolios lose money. The key is to stay with it. Only invest money in the market with money you are willing to lose.
I started by taking about 1/6 of my retirement funds and using them in the market. Overtime I lost about 1/2 of these funds. While this was not comfortable, in this day of interest rates near zero, some high risk trading will be necessary to keep up with inflation.
So find a way to set aside some funds for at risk investing
So how to go about this? One needs to decide how much risk to take. A percentage of total value is a good guide. How near are you to retirement? The closer to retirement that lower the risk. I personally think that now is not a good time to start. For younger people it is important to start sooner than later.
How do I trade?
I use Motley Fool Stock Advisor and Rule Breakers platforms to create my watch list. Motley Fool encourages investment on a long term basis, asking for a 3-5 year commitment for each stock.
I select stocks using the following criteria:
- Limit each trade to about $800.
- Buy no less than 10 shares in each trade. (I will go over the $800 limit for 10 shares if I have invested in the stock previously.)
- Look for divergence on the On Balance Volume. Charts where the on balance volume is higher than a previous low, but the value of the stock is down.
- Normally I do not use stops.
And I trade money from Income Tax Returns and some money earned with my part time job on a periodic basis.
There are no guarantees. I could use these techniques and make money. You might use the same techniques and lose money.
My advice…
Find a way to invest in the market. As a mostly retired person, I use the stock market as a means to stay informed. To keep my mind active. I do not use funds which I can not afford to lose.
As a younger person it is even more important. Start small, study, and decide how you want to go about it.
What I do know is on my first job I began a retirement fund. I put about 90% of my retirement fund into a interest accruing fund. The residual was in a stock fund. I changed jobs after 2 years. Forty years later, I had taken money out of the stock fund, but it’s value was still at least twice as valuable as the interest accruing fund.
Long term a stock fund will do better than am interest fund, as long as funds remain in the fund.
So get started…
Don’t use an excuse to not invest.
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