Stock Market Investing

A Beginners Guide to Building An Unshakeable Portfolio & Achieve Financial Freedom With Proven Strategies

Armani Murphy

Armani Murphy

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Copyright 2020 by Armani Murphy - All Rights Reserved

This book is geared towards providing accurate and reliable information with regard to the topic covered. The publication is sold with the idea that the publisher is not required to render accounting, officially permitted, or otherwise, qualified services. If advice is necessary, legal or professional, a practiced individual in the profession should be ordered. From a Declaration of Principles that was accepted and approved equally by a Committee of the American Bar Association and a Committee of Publishers and Associations.

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Introduction: Personal Notes from the Author

What would you wish for if I said you could have whatever you want? Take some time to think about this question because you might get your wish. Regardless of what you want, a particular resource is needed to make it come to fruition. That resource is MONEY! Everyone in the world who has a consciousness of the power of money does not only seek to possess it; they also desire to attain freedom with it. The freedom you get with money and from it is known as financial freedom.

Financial freedom is not an elusive concept, it is a possibility, and with so many people already living in that reality, you too can get it. When an individual attains financial freedom, he/she has access to money whenever it is needed. The person can also create wealth because to get more money, you will need money, right? Excellent, which means we all should be learning how to make money, invest it, get more of it, and become financially free.

This book will introduce you to the most fundamental strategies that will help you become financially independent. But wait a minute, there are various ways to achieve this money goal, and even if we had more time, we could not exhaust all the options. This realization means we will have to concentrate on a few methods, and this book is going to be all about one of the most viable ways to become financially free.

STOCKS!

Yes, we will be focusing on stocks and how you can invest in the stock market. So many famous individuals in the world today made a lot of money from the stock market, but that is not the sole reason why we are in this discourse. The stock market is a timeless avenue for wealth creation that has stood the test of time and will continue to remain in the future. This means if you are going to become financially free in the future, the stock market is your best bet.

This book provides detailed insight into the nature of stocks, how you can start investing, and the steps to take even after making your first investment. If you always thought the stock market was “Complex,” you are about to read through a simplified yet effective guide on how to enjoy the process.

With this book you are taking a step forward towards building the future you desire, today. As we begin our exploration of the discourse, I want you to remember a Chinese Proverb that speaks of your journey towards financial freedom.

Chinese Proverb: “The Best time to plant a tree was 20 years ago. The second best time is now,” Now back to that wish you were going to make at the start of this book. Do you know what you want now? Continue reading, and I will show you how to get and sustain it.

The Pre-investment Process

The pre-investment process entails the information you should know before investing and the activities you should do before going into the market. This process is very crucial because it mentally prepares you for what you can expect from stock marketing investments. In this chapter, you will unearth fundamental concepts as well as definitions of key terms that will help you understand the investment process.

So what are stocks, and what is the stock market?

A stock is an investment that represents ownership of shares a person has in a company. If you buy a company's stock, you are purchasing a piece of the organization, which is a "Share." When you start buying stocks, you become an investor who has invested funds into a company because you believe the company will go up in value. If the company increases in value over a period, its stocks will also increase, which means the value of your stock will be better than when you bought it.

The stock market, on the other hand, is a place where company shares are traded. These companies have to be publicly listed firms. Buyers and sellers of stocks meet in the stock market to trade stocks. Now you are going to become an investor in stocks; you will buy and sell shares in the stock market as you decide on the companies you want to place your investment funds.

Why stocks? Why should you become an investor?

You should invest in stocks because it offers a very high ROI (Return on investment), and this can happen over the most prolonged period. No other investment platform provides the kind of returns you get from the stock market, long term. Now the emphasis here is "Long term" because for you to get the dividends of your investments in the stock market, you have to be patient.

However, those who give their stocks time to perform in the market testify of the high returns they got. More importantly, investing in stocks is the best form of passive income you can get as you wouldn't have to work at the company you invest in, all you have to do is watch your stocks increase in value.

In addition to these fundamental ideas, you should know that the stock market is volatile, which means that it is not always sunshine and rainbows there. Sometimes the market rises and falls, yet it remains the best bet for investment because, despite its volatile nature, investors still make a lot of money in peak seasons. Simply monitor the market closely, and you will thrive.

Next, you will need to set a budget for your investment because, as a new investor, you may wonder, "How much is required to start?" "How much should I invest in getting high yields?" The amount of money you will need is determined by the number of shares you wish to buy. The value of the stock also matters, and share prices can start from a few dollars to thousands.

A significant pre-investment process you cannot ignore is knowing how much you are willing to put into the stocks. If you already have some money saved up for this purpose, you are ready to go, but if you don't, you might want to start saving towards it. However, this doesn't mean that you should have a specific amount of money before investing, you can start making money from the stock market with whatever amount you've got.

Then you have to decide on how you want to invest in stocks because there are two primary ways of doing this:

The DIY (Do it yourself) option

A DIY alternative is an approach that entails you buying and selling shares yourself. With this method, you wouldn't work with a stockbroker because you are familiar with how the market works, and you can navigate through companies in the stock market.

As a beginner, you may not be able to navigate the market all by yourself just yet. It is possible that you still need help from a stockbroker or an expert. Then, later on, as you get more stock market education and learn how the market works, you can start trading by yourself.

2. Someone managing your stocks

This approach is used by those who know how the market works but still need someone to manage the process and their investment. Also, this method is excellent for those who are keen on getting expert advice and information on stocks. You can work with financial advisors or Robo-advisors. Robo advisors are wealth management services that offer automated investment advice at a little cost.

Now that you know how to invest, the next pre-investment idea you should become conversant with is the choice of a company. At this point, you need to engage in a process referred to as "Fundamental analysis," which is a strategy that requires determining the value of a company first. You must know the value of the company and its history with stocks so you can ascertain if your investment is safe.

For you to know this, you have to study the company's financial statements, income statements, balance sheets, which are released by the company. For example, if a company is consistently at a loss for years, do you think it will be wise to invest in their stocks? Of course not! This is why you must be intentional about knowing the financial state of the company before investing.

You will have a myriad of companies to consider at first, and if you are working with a stockbroker, he might help you narrow it down to a few options. The point is that you should stick to companies with a proven track record of success with stocks, interacting with people who have invested in such companies previously will also be helpful.

This chapter has been all about the foundational aspects of the stock investment from a pre-investment perspective. In the next section, you will get to the practical point of the process, beginning with opening a brokerage account.

How to open a brokerage account

A brokerage account is an investment account. This kind of account is the one you open with a brokerage firm, and it's used to buy investments. Think about when you decided to save money in a bank, did you walk over to the bank and drop the money off without opening an account with them? Of course not, so just as you require a savings account to save money, you also need a brokerage account from where you can invest.

When you open a brokerage account, you are expected to fund it so you can buy and sell investments when you wish. The money and investments in the account belong to you as the broker only holds the account and is an intermediary between you and the investments. With a brokerage account, you have access to a wide range of investments that cut across stocks, bonds, and mutual funds.

You can open an account online in no time and fund it by transferring money from your savings account (this process can take a few days depending on your bank). Also, you can transfer money from one brokerage account to another (this happens when you decide to change brokerage firms). You also do not require a lot of money to open this account as most firms allow investors to open an account without an initial deposit. After opening the account, you can start funding it by purchasing investments.

Additionally, a standard brokerage account is a taxable one, which means your investment earnings will be taxed, and you have no special tax privileges with this account. But if you want to invest for retirement purposes, then you might want to open a retirement account that has tax advantages. However, you will have more freedom to pull out funds from the standard brokerage account than the retirement account.

After deciding on the account, move on to choosing an account provider. You have two options with both offering retirement accounts and standard taxable accounts here:

An online broker

A Robo-advisor

The online brokerage option is for investors that want to purchase and manage their investments by themselves. You can buy and sell using this account on the broker's website.

The Robo-advisor (as explained in chapter one) is a low-cost alternative to hiring a human advisor. With this option, your investment will be managed through a computer algorithm, and if you would like to be less active in the stock investment process, this alternative is the right fit for you.

More importantly, when you open this account and start investing, it is advisable to use the money you can spare for a long time because you will need time for your stocks to yield returns.

So how can you set up the brokerage account?

You can set up your account and complete the application process within 10-15 minutes. After opening the account, you have to deposit funds or do a transfer to the account. The broker will take you through the process, and when the transfer is complete, you can start investing!

With your brokerage account set up, you can start the investment process and buy the stocks of valuable companies. Now with the stock investment, you have a shot at attaining financial freedom because, unlike the regular savings account with low-interest rate, this investment process can give you much more over a period.

This section introduces you to the first practical step you should take as you prepare to invest in stocks. But it is not ideal to open your brokerage account and leave it in an inactive state, so in the next chapter, you will unravel strategies on how to buy stocks for your investment portfolio.

Steps for buying stocks for your portfolio

A lot of investors buy stocks online using an investment account so you can either do that or purchase shares through a full-service broker. Some companies also allow investors to buy shares directly from them, so there are several ways of getting shares. We have already reviewed the first step you require to purchase shares in chapter two (opening a brokerage account), in this chapter, we will move on to other measures.

But first, what is a portfolio?

A portfolio is a collection of investments you own that includes bonds, stocks, currencies, etc. when you want to decide on what to invest in and ascertain how well your investments are doing, take a closer look at your portfolio. After investing for a while, you can have multiple portfolios for varying purposes, in this chapter, we are focused on building your stock portfolio, of which you will need to buy stocks to do that.

Selecting stocks to buy

After setting up your brokerage account, the next step is to start picking stocks off the market. Start by researching the right companies you are familiar with as a customer or your experience with a brand. You are still new to this investment market; as such, you should kick-start the process with a well-known company, one with which you will like to become a part-owner.

The mistake some investors make with stocks is that they buy into a company solely because they want their shares to rise. But as a beginner, you have to look beyond that factor and buy into a company you will want to own. A company you believe in (which is why it is good to start with one you already know).

This is the point where you start reading through their annual reports, get the letters they sent to shareholders as this will give you an insight into what happens with their shares. Don't worry about how to get all relevant information as most of the details will be available on the broker's website (remember you have a brokerage account).

When you have gathered all the essential information and analysis from the market and with guidance from your broker, you can select stocks. In the next subsection, you will know how to determine the number of shares to buy.

Deciding on the number of shares to purchase

When you know the company’s stocks to buy, don't feel pressured to buy a certain amount so you can fill up your portfolio with stocks. Always start small, by "Small" I mean purchasing a single share. Purchasing a single share now doesn't mean you will remain at that level, you are buying a little now, so you can get a feel of the market and know how it works.

Starting small will also help you decide if you can handle the entire stock market process, and this is the time when you can learn a whole lot and gain experience as an investor. Also, do not use the money that you cannot lose, don't use your rent money or money set aside for essential things in your life. Use the money you can lose, and it should be little money, right after you get used to the process and understand it well, you can increase your investments and go big!

Picking stock order

Next, you have to do a stock pick, which entails using your systematic analysis of the companies and stocks to know which stock will be good enough for your portfolio. For you to do this, you also have to become conversant with the trading process because you will be buying shares.

Some investors are unable to handle this step themselves because they don't understand some of the terms used on the brokerage. While there are a lot of complicated words on the broker's online page, you can focus on two main processes of buying stocks. The first is the market order process, and the second is the limit order process.

Market orders

With the market order process, you buy or sell stocks at the best market price (the price at the moment). Your order will be executed and instantly filled because you are buying at the current market price. However, when you pay, you may not receive (if you are buying) or pay the exact amount that was initially quoted. The reason for the slight changes in price is because stock prices fluctuate sporadically.

However, if you use this approach, please ensure that you are ready to pay for the stock immediately because if you place a market order without paying and the market closes for the day, you will pay the "Current" price for the next day (which may be different from what you had the previous day).

Limit orders

Limit orders, on the other hand, give you more control. With limit orders, a share can be at a specific price, for example, $80 per share. Now if you think the value should be $75 per share, your broker will have to hold still for a while, and the order will be executed when the asking price drops from $80 to $75 (this happens when you are the buyer).

If you are the seller, your broker will part with your shares when the bid rises to the amount you set. If you are buying and selling smaller company stocks, this stock buying approach is right for you. Also, if you are going to invest in the short-term, this approach is suitable.

Now you know how to buy stocks; at this stage, we focused more on buying because you are still at the beginner level. But after purchasing a while, you can start selling; then, you will be engaged in "Stock trading" as you are doing both buying and selling. The stock trading process is an avenue for making money on the stock market, turn over to the next section to discover how you can make money from the stock market.

Chapter Four: The process of making money from the stock market

The entire purpose of investing in stocks is to get returns and become financially free; as such, we must talk about how you can make money from the stock market. In this chapter, you will discover three significant ways of making money from the stock market and some additional steps that will help you get the best out of the stock market.

How to make money from the stock market

Dividend stocks

There are individual stocks known as dividend stocks in the market. When you invest in these types of shares, the company pays you a dividend from its profit. The dividend is paid once or twice a year based on the company’s discretion.

With dividend stocks, you will be earning in two ways: Your dividends coming from the company and the appreciating value of the shares you still own. However, not all companies pay dividends, so for you to earn this kind of payout, you need to search for companies such as Coca-Cola that pay dividends.

2. Sell at a high price and buy at a low price

You can make money by selling your stocks at a high price and buying at a low price. When you take this approach, it means you are selling your shares, and there is a regulatory implication for that.

The regulatory implication for short selling your stocks means you have to borrow them first before the sale. Then you can buy back the shares before the market closes for the day (please note that this kind of regulation varies in countries).

3. Buy at a low price and sell at a high price

Buying low and selling high methods is a popular one that has proven to work through the years. As you monitor the market, look out for stocks that used to perform very well but suddenly are at a low price. Buy them at that price, hold onto them, and when they rise again, you can sell at a higher price, thus making huge gains.

In addition to the steps above, the strategies below will help you take the right steps when investing. Some investors make losses because of minimal mistakes they could have avoided, and the next subsection will educate you on some of these steps so you can avoid the pitfalls of such errors.

Have investment goals

First, you need to have investment goals, what do you want to achieve with your investment funds? If you don't have goals, you wouldn't be dedicated to the process, and after a little market shake-up, you will give up.

What are the bases of the market?

You can only make money from a platform you understand, so get to know the fundamental aspects of the stock market. Always intentionally educate yourself on information, and current happenings in the market as this will inform your investment decisions.

What is your strategy?

An investment strategy will guide you as you invest, and it entails the steps you will take while investing. Your goals will inspire your plan, so if you have a retirement goal, you might have a more long-term strategy where you buy and hold stocks till they appreciate significantly in value.

Always analyze your portfolio

Your portfolio is not meant to be somewhere unchecked if you don't review it, how will you know the stocks that are performing well and the ones that have become a liability? Periodically check your portfolio to know the progress you are making and how to do better.

Take risk management seriously

Risk management is crucial because it helps you curtail the impact of share losses. For example, if you have $10,000 worth of investment, it is advised that you The maximum risk level is the amount of money you are willing to lose when the market becomes unstable.

When you get to that maximum level, you sell off the stocks to prevent further loss. So back to the $10,000 investment, you can set a maximum level at 4%. When you lose up to 4%, you don't wait for it to get worse, sell the stock, and cut your losses.

If you don't make money from stock investing, then what is the point of investing? So when you start always keep this thought process in mind: you are in it to make more money! But the story doesn't end with you making money from the stock market; the next chapter will unravel how to diversify your portfolio because for you to attain financial freedom, you must be willing to invest more and in multiple ways.

Diversification: The pathway for sustaining financial freedom

With this section on diversification, our journey comes to an end as you will be set to start investing. Diversification means spreading your investments such that you have various investment portfolios instead of placing all your money in one stock. Also, a diversified portfolio with a variety of investments will give you more exceptional results because you face lower risk, unlike when your investments are all in one place.

Have you ever heard the statement, "Don't put all your eggs in one basket?" well, that statement sums up why you should diversify your portfolio. Imagine placing all your investments in one stock then the market crashes! What will you do? You will lose everything you worked for, so to avoid such a situation, you must spread your investments.

So how can you diversify your portfolio?

Spreading your funds

Firstly, avoid putting all your money into one stock! Spread your funds to other stocks within other companies. More so, try not to focus solely on one industry because if there is a crisis in that industry, the stocks may crash, and you will experience a considerable loss.

2. Consider alternatives

There are alternatives such as index funds or fixed-income funds you can include in your portfolio. Some of these funds come with meager fees, which means you wouldn't have to spend so much, and managing the funds also requires minimal costs.

3. Consistently build your portfolio

Always add to your investment regularly; don't wait for a particular season in the market because when you do, it causes you to rush the process. But when you invest continually and in different companies, you gain access to multiple opportunities for high returns

.

4. Diversify into other areas

As you trade in stocks, you will have access to funds; you can use the monies to diversify into other investment opportunities other than stocks. Real estate is an example of a great investment option you can consider in the long run as this will help you earn more from another sector.

The first step you should take is to get into the market, learn the basics, and start trading. But don't stop with the "Buy and sell" technique, continue to grow with your investments through diversification. When you make money, seek to multiply it, and you will get what you wish for: Financial freedom.

With this chapter, we have come to the end of our incredible journey together. I believe you have made immense progress from the start of this process until now. But the story continues in the next and concluding section where you will be propelled to take action.

Afterword

Your wish is about to come true, and I am confident you can feel the excitement as well! Now that you have access to such inspiring information that teaches about the possibilities within the stock market, what will you do next? What do you do right after reading a book that can transform your financial state?

Do you drop the book off on the table and carry on with life like you didn’t read it? Do you call your best friend over to share the lessons? Or do you take action immediately? The proof that you have read a book is not in the knowledge you possess; it is in the results you showcase. No one cares about what you know or how you acquired such information, but everyone will become curious about you when you succeed.

Success doesn’t happen because you read a book. Yes, it is impressive that you read, but now is the time to bring the words you read to life through intentional and consistent action. Too many people in the world have information about the stock market. People know how the market works, yet not many of them have translated that information into financial freedom. Do you know the reason for this disparity between knowledge and results?

The reason is attributed to a lack of execution. Have you heard this statement, “Knowledge is power?” If you have, you will agree that it makes you think that all you have to do is get knowledge. But there is a different interpretation of that statement, and it is “Knowledge is potential power.” Knowledge only has the potential to give you what you want.

To get what you want, you must implement the knowledge gained, and this is how you can attain financial freedom. While I commend you for reading through this book from the beginning to this point, I urge you to become proactive with taking action.

The best time to invest in the stock market is NOW! Not tomorrow or when you think you have a lot of money. Warren Buffet started investing in the Stock market at a time when it wasn’t too popular, and today, he is a billionaire who made most of his money from the Stock market. So you see that Mr. Buffet started quite early. Do you think he would have enjoyed tremendous success if he procrastinated? I certainly do not think so. After reading this book, irrespective of what you do, make a commitment to your future by investing in the stock market.

You will watch your wishes come true, and I cannot wait to read your story of how you became financially independent by investing in the stock market. Always remember that those who win, those who overcame their limitations are those who took a step of faith. With this book, you have received direction backed by important information; the question is; What will you do with it?

Best Wishes!

Power Principles

Investing in stocks can yield long-term financial returns that will help you achieve your goal for financial freedom.

You must know the financial health of the companies you choose to invest in before buying their stocks.

Don’t place all your funds in one stock or company

You can trade stocks using your brokerage account.

Always start small when you buy stocks for the first time.

You can earn money from the stock market by buying stocks when they are low and selling when they are high.

Dividend stocks are the best option because the company shares its profit with you in addition to you retaining your stocks as it grows in value.

To become a better investor, you must monitor the market to know when to make a move (buy or sell).

Work with a stockbroker at this beginning stage.

A diversified portfolio is an asset to an investor.

Relevant Resources

https://www.nerdwallet.com/blog/investing/how-to-buy-stocks/

https://www.youtube.com/watch?v=Mxu85SCT9lQ

https://www.fool.com/how-to-invest/stocks.aspx

https://www.investopedia.com/articles/basics/06/invest1000.asp

https://www.investopedia.com/articles/03/072303.asp