Investing for beginners: The Obvious Choice.

December 31, 2020

Damyan

Written by Damyan I write this stuff. Enjoy You should follow them on Twitter

Investing for beginners is hard. But it shouldn’t be. In fact, investing is simple. And very fun. Not to mention very profitable. If you choose wisely, of course. And don’t chase the wrong investment. Or do more harm than good. For example too much diversification. Or overestimating the return of an asset. To view, the real returns of 11 of the most popular investments consider clicking here.

Here are 6 ways to master investing!

Choosing an investment.

Investing for beginners

Firstly understand the true returns of different investments. Interest rates for savings accounts are 0%. That means -2% per year return. Thanks, inflation! US Bonds return 2% in 30 years. We are mortal. We need something better. Mutual funds average 4% per year. US real estate more than doubles that at 9.4%. Gold slightly edges real estate with 10.4%. While the S&P 500 matches Gold at around 10% return. Contrast that with Amazon stock. Amazon stock averaged over 6900% per year since 1997. The stock stayed flat from 1997 to 2009. Then exploded in value. Why? Investors finally got it. And the market valued Amazon stock correctly. And the same thing is happening with Tesla stock. Bitcoin as well. It returned over 1300% per year from 2016. Or 6900% in 5 years. To conclude the choice is obvious. Hold a truly revolutionary stock or crypto asset.

Understanding diversification.

The most misunderstood part of investing for beginners. And that is diversification. Conventional wisdom tells us diversification lowers risk. We say it’s killing your gains. Investing is like a close friendship. Buying the S&P 500 is like having 500 Facebook friends. None of them are truly real. In addition, diversification can lead to higher fees. And doesn’t help in a market downturn. To illustrate, consider this. Elon Musk is rich because of Tesla stock. And Jeff Bezos is rich from Amazon stock. The same goes for Bill Gates. These now billionaires chose correctly. And they invested everything they had. Now they are the most successful investors out there. To conclude the choice is obvious. Choose wisely and hold on for dear life.

Predicting the future.

One thing is for sure. Every high growth asset is a technology asset. For example, ExxonMobile is a technology company. They use advanced AI and high-tech seismic tech to find oil. Another example is Walmart. Walmart uses blockchain for its supply chain. High growth is impossible without cutting edge technology. The next high growth assets are at the forefront of technology. This also means some industries are going to change completely. For example oil. The oil industry is shrinking. And it’s going to continue shrinking until it disappears. As solar becomes cheaper every year. Until using oil becomes financially too expensive. Another example is brick and mortar banks. Cryptocurrency and online banks like Paypal and Square are eating their lunch. Online banks have way lower fees, tones more features, and lives in your pocket. Oh, and it works on weekends. Unlike banks still stuck in the 1850s.

Why beginner investors should invest in next gen-tech?

Consider this as an example. In March 2020 the stock market decided to jump out of the window. Thanks to the pandemic of course. Perfect time to invest indeed. I choose Tesla stock. As Tesla is disrupting energy storage, distribution, and production. As well as transportation. On the other hand, a friend of mine bought Occidental petroleum. As it was cheap and it would surely go up. We both bought our stocks at the same time. Tesla went from 380$ to 3500$ pre-split (700$ post-split). On the other hand, Occidental petroleum went from 10$ to 17$. Tesla stock also entered the S&P 500, replacing ironically Occidental petroleum.

Investing vs Trading.

Investing is a long-term strategy. Trading is a short-term game. Extremely important to understand when investing as a beginner. Over 80% of traders lose money. 10% break even and 10% make money. Successful traders either have advanced trading software for high-frequency trading or do insider trading. You are definitely not both. Investing on the other hand is passive. No looking at 200-day moving averages. Or how the RSI is on your stock. No. Do yourself a favor and don’t go down that rabbit hole. The most successful form of investing is long term investing in high growth assets. And because of technologies like AI long term investing doesn’t take decades. In fact, it takes just a few years. 50x your investment or more is possible. In just a few years.

Investing Top Tip

This is the most important investing tip for beginners. Selling is adding risk. Also, you are missing out on gains. Why sell when your asset is rising every day? And will continue to do so for the next 10 years? Ask any investor their biggest mistake. And the answer almost always will be “I sold too early”. And remember, stocks can go up way more than you think. 

Top Assets to Invest in 2021.

  1. Tesla stock: 9 of the 11 biggest companies by revenue are oil and legacy automakers. And Tesla is disrupting all of them. Tesla is offering a better and more affordable alternative to them while being good for the environment. Also full self-driving. Which will create trillions in revenue. Yes, not billion, trillions of dollars of revenue. Consider clicking here to read why buying Tesla stock in 2021 is a great idea.
  2. CRISPR Therapeutics: This company makes cures for diseases using CRISPR gene-editing technology. Medicine that cures genetic diseases with one dose. Something that will truly change the world. CRISPR Therapeutics is currently developing 3 cancer medicines. And they will have a cure for type 1 diabetes. The most expensive disease in the world. The companies market cap is around 12 billion dollars. And the addressable market in 2025 is 100 trillion dollars. This company will easily 50x or even 100x in just a few short years.
  3. Bitcoin: The first cryptocurrency. And the first digital monetary system that works without a trust-based system. Also decentralized and completely unhackable. And recently the favorite asset for huge institutions to invest in. Why lose to inflation when the companies money can double triple or more in a year?
  4. Ethereum: The second most popular cryptocurrency in the world. And now the developers have introduced Ethereum 2.0. The new protocol uses Proof-of-Stake rather than mining like with Bitcoin. And of course, Ethereum has smart contracts. Contracts that are executed automatically. This has the potential to replace entire governments.

Finally, if you wish to learn more about investing make sure to download the free ebook by clicking here.

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Disclaimer: The author has a position in Bitcoin, Tesla stock, and Crispr Therapeutics.

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