Before buying your first stock, you’ll probably want to sit back, quietly and search the web for information. You join groups on Facebook, watch some YouTube videos, and start following popular podcasts.
The idea of earning more without working more is enticing, and buying that dream vacation with your family that you’ve been longing for for many years (how can the neighbour afford three weeks at a resort?!). Having a buffer to possibly retire from work and experience the world or enjoy you hobbies instead of working until you’re 70.
Banks don’t reward saving.
As a beginner in the stock market, there is a mountain of information you have to overcome, but it’s not impossible – and many eventually get started and buy their first securities.
Bying versus Investing
On social media, you can see that many – not only beginners but also more seasoned investors – make the mistake of buying stocks. And there is a difference between buying and investing. In many stock investment groups they collectively make this mistake, and unfortunately, it is further reinforced on YouTube and in podcasts.
On Facebook forums, you see discussions and questions like “Will the Tesla stock price increase in the future?” “Will the green transition lead to an increase in the sale of Finnish moss?” and “Which sectors will become trendy in the future?”
This is how people get into the bad habit of buying stocks with the hope that they will go up in the future.
To invest means to have an expectation that something will be worth more in the future – not a hope. As an investor, you should focus on the risk instead of becoming an amateur trend analyst.
Think about Risk
It’s not about predicting what will be trendy – but instead, when you come across a stock, think about the risk.
For example, let’s consider the automotive industry – it is going through disruption these years. From fuel-powered vehicles to electric cars, and now there are several companies developing self-driving cars. This means that car manufacturers without the next-generation technology will fall behind. The automotive industry will undergo disruption – there will be changes in the next few years, and that poses a risk. So maybe we should steer clear of this industry until it has gone through the transformation.
Nobody on social media mentioned risk – the focus was on predicting the future. A future that no one knows.
In many countries, it is not common to pay for education – we are accustomed to free learning. However, it is valuable to invest in yourself and choose to not take the journey alone. Hiring a mentor may cost money upfront, but it can save you from costly mistakes.
And you avoid doing like the many who still buy stocks, and instead you can call yourself an investor.