There’s something about capital markets that captivates everyone: Some think stocks are an easy way to make a quick score. Others, on other hand, liken stock to gambling.
And then there are some who just don’t have a clue about stocks at all.
(Fret not, #WealthGANG, we’re here to serve!)
But why is the stock market so fascinating? What causes people to be completely overawed by it?
Despite the many myths, it is extremely easy to trade in the markets; you can actually get started on your smartphone for less than $10.
But to trade stocks successfully? Now that’s another story—despite what those in-their-20s Instagram crypto money managers and scammers want to tell you.
For all the myths, biases, (mis)beliefs and misconceptions, you can still hedge your bets by following a disciplined blueprint. In this case here, we will share with you what not to do.
Here are X common investor mistakes to avoid at all times.
Mistake #1: Thinking you can make a quick buck from Wall Street
This is probably the single biggest misconception about the stock market. Investor legends like Warren Buffett always maintain you need to invest over a long-term horizon to book big profits.
And even if you have stories like the ‘Teenage Bitcoin Millionaire,’ trust us on this one! They’re the exception, not the rule.
Mistake #2: Investing on impulse
In other words, decision to enter the stock market’s based on an impulse. There’s no proper entry strategy and no exit strategy.
This is not how an investment decision should be made. Every investor should realize that investing in the stock market is a long-term play—it’s definitely NOT a get-rich-quick scheme.
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
Mistake #3: Following the hot tip!
Investors are all on the lookout for hot leads and stock market tips. But in reality, there aren’t any. This mistake is exactly how the “Wolf of Wall Street”got people onboard with his schemes.
Even if someone does have a hot tip, you have to watch out for human nature: People may skew positively towards stocks they own—and negatively towards the ones they don’t.
The reality is this: There are qualified analysts who spend all day researching market trends and metrics.
Investment managers and brokers then share these analyses with premium clients. Much more credible info, yes. However even after receiving this analysis, there is no guarantee the investor will see an ROI.
Warren Buffett is a firm believer that investors can grow wealth by just replicating the indices instead of looking for multi-baggers and stocks that are expected to crush the market.
“If stock market experts were so expert, they would be buying stock, not selling advice.”
Norman Ralph Augustine
Mistake #4: “Buy/Sell Strategy”
This is probably the biggest misconception of all. Many investors, impulsively, end up buying a stock just because they see the price surging. (Again, think Bitcoin in December.)
As the price continue to climb, they’ll sell the stock and make a huge profit. The so-called Buy-Hold-Sell Strategy
But that is not how the stock market works. (Buffett’s mantra is buy-hold-and don’t watch too closely.)
If you do buy a stock, hold it for some time and then sell…you don’t have any guarantees the stock will rise.
A better play—aside from Buffett’s, obviously—is the borderline cliched “Buy Low/Sell High” strategy. In this strategy, an investor buys a stock on the downslide instead of when the price is rising.
All the investor has to do is hold the stock until a price correction occurs. If the stock is fundamentally strong, the price will increase. This will be the time to sell it off and earn a profit.
“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” — Warren Buffett
Mistake #5: No clear investment objective
Every investor should define, clearly, what his or her investment goals are.
The rule of thumb of investing is the higher the risk, the higher the return. So if the market return is less, then—needless to say—the risk involved is deemed less.
There are two forms of securities, generally: Stocks (equity) and bonds (debt).
Equity stocks tend to have higher risks associated with them. However, there is a tremendous potential to earn capital gains from equity shares—but with the caveat that you should be prepared to lose your investment
Bonds and fixed income instruments are relatively less risky than equity shares. They offer periodic returns in the form of interest but are still prone to market risk.
A short-term investor looking for minimal risk is better off buying treasury bills and government securities.
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” — Peter Lynch
Will Cloud Gaming Drive The Next Big Gaming Transition?
The global gaming industry has always been a disruptive one. Nuclear physicist Edward Condon developed the first computer game in 1941 called Nim, one which pretty much saw the computer win 90% of the time.
The disruption didn’t fizzle out. Soon afterwards, the first programming guidelines were written for a chess game developed by Claude Shannon, while a decade later the US Department of Defense created a war game — STAGE.
This really set the stage for what was to come later — video games. American investor Ralph Baer wasted no time and conceived the idea of playing video games on TV, and the world’s first gaming console was released. The rapid evolution of gaming consoles coupled with gaming design and the introduction of graphics cards have taken the global gaming industry by storm.
In the last decade, the evolution of smartphones opened up a totally new segment known as digital gaming. In 2016, Activision Blizzard paid close to $6B to acquire King Digital- a digital gaming behemoth. Not one to trail far behind, the eSports segment, despite its nascency, proved to be a long-term revenue driver for top gaming firms.
Will cloud gaming be the next key driver in global games?
Now companies such as Microsoft [MSFT], Google [GOOG] and Electronic Arts [EA] aim to create a market for cloud gaming. So what exactly is cloud gaming? It’s similar to online streaming services such as Netflix [NFLX] and Amazon Prime [AMZN], but with games.
Cloud gaming will allow users to play games on their computer or mobile devices. A remote server will send players video feed and receive controller inputs. This now means that players no longer need to purchase gaming consoled to play the latest games. All you need is a stable internet connection.
Google’s cloud gaming project is called Project Stream and the company launched a beta test last month. Players required a Google Chrome browser and an internet connection of 25 Mbps or higher.
Microsoft which also manufactures the Xbox consoles announced its cloud gaming platform known as Project xCloud. It has confirmed several Xbox games for beta testing such as Halo, Minecraft, and Gears of War.
The tech giant is hoping for growing interest in cloud gaming to offset any declining sales in gaming consoles.
Following Google and Microsoft, top gaming publisher Electronic Arts has forayed into this space, with a project known as Project Atlas.
Will this move garner global attention?
The shift to cloud gaming is going to be as disruptive as any in the gaming space. Players can now subscribe and stream games online instead of spending over $300 for the latest gaming console. The cloud gaming space is expected to grow at a compound annual growth rate of 26% between 2017 and 2023.
While Netflix and Amazon have changed the consumption of entertainment via cord cutting, it is very likely that cloud gaming will soon be a hit among players in a few years time. Is this the end of the gaming console?
10 Stock Terms Every Newbie Investor Should Know
Investing in the financial markets can seem quite tricky. There are far too many stories where people tried to play the stock market without much success. When the markets are on a roll, everyone wants a piece of the pie.
Here are 10 terms every investor cannot afford to miss.
1. Market Cap
The market capitalization of a stock is simply the total number of outstanding shares multiplied by the share price of the company. Companies are generally differentiated on the basis of market cap.
Small cap companies generally have a market cap of between $300M and $2B, while mid-caps are between $2B and $10B. Any company with a market cap over $10B is considered a large-cap. While small-cap and mid-cap stocks have historically outperformed large caps, they are also way riskier.
Being A Millionaire: What Does It Actually Mean?
You’re dreaming about luxury vacations and nice cars. OH, you can’t wait to be a millionaire.
But I’m here to tell you to think again.
While having more money is never a bad thing, what you’ve probably envisioned and what the reality is don’t match up. Let me explain.
What is the Definition of a Millionaire?
By definition, a millionaire is a person or family who has a net worth in excess of $1 million dollars. This answer is very U.S. centric as different countries have their own versions of this answer. For example, it takes 117 Japanese Yen to make 1 USD, so $1 million Yen doesn’t get you very far!
Even though in the U.S. the concept of a millionaire is static, what those million dollars gets you over time can change dramatically.
An example of that is the effect of inflation. A million dollars in 1950 is worth about $10.5 million in today’s dollars. But, the definition of a “millionaire” didn’t change. So, Today’s millionaires have 1/10 the amount of money that millionaires had when your parents were born.
So, the idea of “millionaire” status is really less meaningful than it was decades ago.
Another thing that messes with the definition of a millionaire is the fluctuation of exchange rates and purchasing power.
Let’s go back to the example above with Japan. We know that 1 US Dollar can get 117 Japanese Yen. We know that $1 can get you a chicken sandwich at a fast food restaurant. If you can go to Japan and get a similar sandwich for ¥ 117 then your purchasing power hasn’t changed.
The reason why I bring this up is to show that having a million dollars may be worth a lot in one place in the world but not worth much elsewhere depending on purchasing power.
How Many Millionaires in the U.S.?
There are roughly 325 million people in the U.S. which means that around 4.6% of the US population are millionaires. In other words, around 1 in 20 people are millionaires.
When you go to the mall, a huge number of cars in that parking lot are owned by millionaires.
In your child’s classroom, chances are one of those children were born to a millionaire family.
Chances are, one of your friends or family members is a millionaire and you don’t even know it.
But, if so many people are millionaires, where are all the Lambos and mansions?
It’s Not What You Think
Net Worth is not cash in the bank. You can’t spend $1m when it’s coming from the value of your home or 401k. Even if it was cash in the bank, it’s not even a lot of money.
$1m doesn’t get very far. You can buy a decent house with it but that comes with expensive maintenance, lawn care, repairs, and a crap ton of new furniture to fill up 5x more space than you’re used to having.
It can get a foreign sports car, but that comes along with $500 oil changes and $1,000 for a new tire (remember, you need 4).
$1,000,000 invested conservatively could earn you around $40,000-$50,000 per year in interested. That’s hardly enough to retire on especially as old age comes with added costs of health care.
But, if most of that $1m is in your home, which is true for most people, it’s not earning any interested. Even if it was, you’d have to sell your home to get that money. Then what?
Don’t Focus on Becoming a Millionaire
Of course, anyone would rather have $1m than not have it. But, don’t make it your focus. Having it isn’t going to get your cars or vacations. Net worth is one thing to measure, but it’s more important to focus on cash flow.
Yearly passive income will buy you anything you want. It’s money you can spend. It’s cash in the bank. Net worth is money locked up somewhere. You need assets, but assets don’t buy you things. If that asset doesn’t produce cash flow, you can only use it by selling it and that’s not a good place to be.
What’s more important is focusing on building up passive sources of income from real estate, side businesses, stocks, or other ventures.
Focus on building up $40k or $100k in passive income rather than focusing on having $1m in net worth.