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
This Mogul Became America’s 1st Black Billion-Dollar Businesswoman
Where to start?
She’s the first black billion-dollar businesswoman. Before Oprah Winfrey.
She started as a TV executive, founding Black Entertainment Television (BET), the first TV network targeting African Americans. She then became a real estate mogul.
Oh, she also owns a stake in three major sports franchises, the NBA Wizards, NHL Capitals and the WNBA Mystics, the African American, period, to boast that claim.
In honor of Black History Month, let’s dive into her remarkable career.
- Born Sheila Crump in McKeesport, Pennsylvania, Johnson co-founded BET in 1979 with then-husband Robert Johnson. The couple sold it to Viacom in 2000 for $2.9B
- Sheila Crump Johnson became the first African American woman on the Forbes’ Billionaire list in 2000—beating Oprah Winfrey to the distinction.
- Per Forbes, Johnson has an $820M net worth as of 2019
Foray into real estate…
After closing the sale to Viacom, Robert and Sheila pocketed around $1.5B each. Johnson used that windfall as seed money to build a hospitality real estate empire in 2005.
“There’s a disparity in paychecks between whites and blacks,” she told the Wall Street Journal. “I will never forget that.”
As CEO of Salamander Hotels and Resorts, Sheila controls a spectacular portfolio of six luxury hotels in Florida, Virginia and South Carolina. And she’s built it from the ground up—literally—in her own spirit.
“I’ve been to many hotels, not only in the US, but all over the world,” she told Forbes last year. “And I wanted to find something that was going to really make Salamander stand out beyond all of these hotels.”
So what does that mean?
“You have to understand, there are a lot of people, investment companies, with very deep pockets,” she says. “They can do it, but they don’t have the experiences that we’re able to bring. I am constantly trying to find a way to help Salamander Resort & Spa stand out head over heels above any other hotel — not only in the area, but in the nation.
“I want them to leave that resort wanting to come back and not just say, ‘I’ll be back in six months.’ I want them to come back all the time.”
And so far it’s worked. In fact, on Forbes Travel Guide’s 61st list of Star-Rated hotels, Johnson’s Salamander Resort & Spa outside of Washington, DC earned a Five-Star distinction.
Forbes: “Everything [she] touches turns to gold.”
That’s a real quote. From Forbes. Last year. It’s also true.
BET? Billion-dollar exit. Washington Capitals? Stanley Cup.
And Roma. Won 10 Oscars. Who showed it before a single soul started caring? Johnson’s Middleburg Film Festival. (Which, by the way, has 32 films and counting in Academy Award contention.)
Remember her golf resort at Innisbrook? Oh, yeah. Hosts the Valspar Championship, one of the PGA calendar’s most-anticipated tournaments.
Becoming a billionaire comes with a new level of clout as well. “When you don’t have money, you’re not invited to special events; you really don’t matter,” she told WSJ. “It’s a society thing.”
So instead, she’s turned to giving back. Her Sheila Johnson Fellowship’s paid for more then 40 scholarships at Harvard University for students who otherwise wouldn’t afford to attend.
Breaking glass ceilings.
There’s an alarming statistic in business and diversity—especially as it pertains to women. According to research by investor Richard Kerby, 18% of all VCs are women—and only 3% are black. In addition, less than 50 black women ever have raised $1M in funding.
“When I got started,” Johnson says, “I couldn’t get a loan. I had to use my own money to get Salamander Resort and Spa.”
She explained to WSJ last year that men can go to any bank with a bank proposal. And no matter how “wacky” the idea is, she said, “they’re going to get the financing. Women do not have that ability.”
Johnson’s taken it upon herself to do something about that, becoming one of the founding partners of WE Capital, an investment firm that invests in female entrepreneurs.
“I started out in a very unique position where I had my own capital to be able to get started,” she says. “But there have got to be banks and investors that believe in helping women who want to be entrepreneurs in the hospitality business.
“And it’s just really, really important that they really take a look at this.”
5 Quick Ways To Get Rid Of Your Student Loans
Student debts have hit a whopping $1.5 trillion. To put that into perspective, you could buy the two biggest tech giants – Apple and Facebook, and still have money left to splurge. Nearly half the students who head to college take out student loans, and despite the worries on how you’re going to meet the interest and repay it all back, it’s doable if done right.
1. Consolidate Your Student Loans
You might have opted for multiple student loan options, all with with different payment dates, repayment terms, and interest rates. If you bunch them together, the perks could be significant – anything from extending your terms to decades, to enrolling in debt forgiveness programs.
2. Refinancing Your Old Loans
Some borrowers are given the option to refinance their loans by taking out a loan to pay down the old loan. The best bet is to refinance your older loans with a new loan at a lower interest rate. Here’s a great post that compares both loan consolidation and refinancing.
3. Gradually Increase Your Repayments
Paying off your debts right out of university might work out tough. But after you’ve settled into a stable job, raise your repayment levels every year and you can scratch months of repayment off your debt.
4. Check Out Employers Who Offer Assistance
While this should not be the only criteria to filter out your employer, an added incentive to finance your student loans could be a big bonus.
5. Use Your Lender’s Autopay Plan
Most loan programs come with an autopay program that gives a small discount of 0.25%. Does this help at all? If you look at repayments of small amounts over a short period, it might not be significant. This can be used to chip away at bigger payments you owe.
[VIDEO] ETF, Explained
Stocks, bonds, mutual funds, hedge funds, REITs, S&P, indices…there’s a lot of jargon that goes with investing. Lucky for you, #wealthgang, we have all the breakdowns here, in a non-boring way that’s easy to understand.
So what’s an ETF? Well, ETF stands for exchange-traded fund, which basically is a fund that owns various stocks. Giving you the luxury of diversifying your investment dollars into several stocks vs. just one.
Or as wikipedia puts it, an “ETF holds assets such as stocks, commodities, or bonds and generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value, although deviations can occasionally occur.”
There are now over 6,000 ETFs on 60 exchanges and ETFs exist for everything from corporate bonds to gold bars to oil futures.
If that doesn’t make sense, just check out this Bloomberg video.
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