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Tips to Avoid When You First Start Investing

| March 26, 2020
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The difference between investing and trading are vastly different. Day trading being on the very end of the spectrum and retirement investing on the other. The amount of day traders that can make more return than the S&P500 is little to none. Day trading should be held to minimal amounts of money and kept as a hobby. The stock market is extremely fun to get into but many become addicted to it like gambling and the losses can mount quickly. With trading apps, like Robin Hood and WeBull, the barrier to enter the market had dropped to zero because there is no cost of trading. In my opinion trading costs do not matter unless you are buying up a couple of shares of stock. The breakeven point becomes more of a factor with trading costs and low amounts of capital as each percentage point matters. This becomes less of a problem when more capital is used.

The multitude of factors and insider information that goes around does not make trading a viable endeavor because the cards are stacked against you from the beginning. Trading should be kept as a hobby through paper trading which allows you to invest in the market with fictitious money in the active market. This is a great way to learn from mistakes and lose no money. When using your own capital you are extremely emotional and you are more subject to make mistakes. Starting off using fake money allows you to remove the emotional attachment and trade based on logic. If you find out after years of trading paper money and you are making consistent profits then maybe you should starting using your own capital. Investors don't care about the day to day market swings because they look at past trends and can see that the market has only increased in time. Investors during the 2008 financial crisis only lost money if they sold. The ones that kept their money in the market more than made back there money back. The name of the game to investing is patience, which almost no one has. 

Warren Buffet puts it best when he said that if you cannot own a stock for 10 years you cannot own it for 10 seconds.   

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