I am not going to give you some bogus ‘I guarantee you will be a millionaire tomorrow’ speal; this is not a book deal; only through core strategy can you do this.
That being said, you most certainly can do well, and it is actually a pretty simple concept. It is easy to become wealthy (but not quickly, and certainly not tomorrow- that is a load of BS). You can very easily become a millionaire one day- no, I promise you it WILL happen if you follow my advice exactly.
Don’t worry, there is a catch. Not everyone can do it; only a select few will ever be able to physically carry out the plan I’m about to outline. All of you bloggers that claim to make $13,000 a month- taking 20 minutes to read this article can easily be what turns that 13K into 18K or more. That is, if you actually do make that much, and aren’t just up-selling yourself (don’t lie; we both know you do it). If you are in that high income bracket, this post is definitely for you.
Keep in mind, I am not pulling your leg; I back up everything here 100%. Pay attention to everything I say though; you can’t deviate from my strategy, screw up, and say it is my fault.
What Is A Stock Really?
First of all, before anything else- understand what a ‘stock’ is. When you go out and buy a share (stock/s) of any company out there, you are actually buying a tiny bit of that company; you own it. You can attend shareholder meetings. You have a say (no, not like Adam Sandler in Mr. Deeds, but the same idea).
Interesting to note- this is one reason some (I have noticed this prevalent among some electronic corporations) various companies set their stock value at ridiculously high sums, like 1.5 million a share.
Stocks are a way companies use to pull in revenue; they are borrowing money from you, in exchange for a portion of ownership. The idea is they will use that ‘investment’ to expand, thus increasing in value- so their shares increase in value. If the shares didn’t increase in value with company expansion, people would keep buying them, the market would become saturated, and that would lead to bad things. Or the company could tank, and your investment will become worthless.
People think of stocks in terms of ‘getting rich quick’. Unless you have insider information, which is in fact illegal, this doesn’t happen. Well, or you would need to be extremely, extremely good at multitasking and very well educated economically- also less than 1% of actual investors. Believe me, it is not easy.
A Couple Success Stories; How They Did It
Donald Trump? That is Real Estate, and he started out as a millionaire (or his family); what he did was just good business, nothing impressive. Regardless of how much truth there is to the man (no politics here, sorry), he is a very, very good salesman- a highly valuable trait to have. I can all but guarantee this had a huge role to play in his current success.
This is a man not at all accustomed to anyone doing anything but exactly what he wants, which often becomes apparent during his political outbursts.
Warren Buffet (My Favorite Investor)
Warren Buffet? Now, this man would fall into the elite few I spoke of earlier, a man that does know the system inside and out, and a man who used every bit of this knowledge to his gain. Also worth a few Billion more than Donald Trump.
As the spearhead of Berkshire Hathaway, an enormous investment firm- millions were and are either made or lost quite frequently based upon his feelings that day. Ironic, this individual has lost more money then most millionaires will see in their lifetimes- now that is impressive.
How He Did It
A young Buffet landed a high income (for the time) job working at the NYSE, back in the early days when people shouted and paper slips were tossed about (the system has become much more efficient). This alone would have earned him a comfortable living, but not what led him to become one of the wealthiest men in the world today.
The key to his ultimate success wouldn’t have been available if he were not in that position, however. What he did was really quite ingenious- he convinced various family members and friends to invest their money in him, promising to turn a profit (most of those individuals did in fact become millionaires). Now, he took there money and created one huge investment, as opposed to many small investments (a type of Hedge Fund, if you care to look it up), to maximize interest turnover. He also made very wise, educated investments with that money.
It is ironic; countless people base their investments upon the decisions Warren Buffet makes at any given point, and wonder why they loose huge sums of money. The difference is- Warren Buffet can take a million dollar loss and say ‘Ah well, on to the next one’. He actually expects to loose money here and there; it is part of his overall investment strategy- and that simple fact is ironically what so many investors can’t grasp. Using the kind of money he’s playing with, you can find that 1 winner for every 5 losers and still make out.
He also takes into account every facet of the business, something very few people even have the knowledge to do. Do they have a solid, well thought out business plan? How educated is this entrepreneur? What is his background? Has he launched other successful companies (in other words, is he experienced)? Who are his partners, and what is their individual backgrounds? Who are his competitors? And, most important of all- what is the overall market for the services they propose to offer?
I am going to say the exact same thing I have watched him say on numerous occasions; don’t take blind leaps. Make educated investments. Know what you are getting into.
How it works
No, the people who write books, the success stories, the few who did make a lot of money- they had a lot of money to invest (which is what they don’t tell you). The system works kind of like a bank and interest; the more money you invest, the greater your returns will be. In other words, 10% of $100 is only 10 dollars, but 10% of $10,000 is 1,000 dollars.
Wouldn’t you rather earn an extra $1000 annually as opposed to just $100? Of course, all the numbers here being just examples. Even better, your percentage will increase by a fraction annually (depending on dividends offered).
Tip: Re-invest your dividends; don’t withdraw them. The big picture- your company of choice may choose to take this extra revenue and purchase a new building, for example, thus expanding. Your shares would ideally increase in value do to said expansion.
In the end, you are only going to reap large rewards if you commit large investments. No, the ‘invest a dollar every week’ ideology your parents told you won’t do much. And that is the catch- that is why I am writing this and not lounging on some beach.
Take a look at the Dow Jones Industrial Avg. – that is the top 30 companies considered to be the leader in their particular industries. Ok, you clicked on the link, right? Now don’t close the page. If you are familiar with how this works, feel free to skip to the next section. If you just think you are, or haven’t a clue, read on!
You see 5 columns, right? I am not going to explain the numbers because they won’t be the same for you, but the categories depict the price of a given stock, how much it has changed since opening of business, the percentage change, ‘volume’ (that is, how many stocks are out there), and the yearly change to date (YTD).
Pick a company, or a few (I favor Disney, Nike, and McDonald’s- just to name 3). Look further; examine where they were at a year ago, five years ago, etc. Compare their growth to other related companies. I could go on, but the idea is- if you want to be a contender in the game here, and it is very much a game- nothing happens due to blind luck- you need to know as much as possible about how this works.
Know the Game
You see a company is doing well? Ask yourself why it is doing so well, and don’t give up until you find the answer. Are various, seemingly unrelated stocks jumping in value near the same time? I promise you, that isn’t a mere coincidence (reasoning that actually took me a bit to ultimately dis-cipher, but I did). See where I am going?
The stock market is very much like a game of chess, and you are playing a very skilled opponent. There is a whole lot of strategy involved, but once you know the pieces, once you are able to analyze all the data and foresee moves ahead, it becomes a whole lot less intimidating.
An Unsuspecting Irony
I remember one conversation last Thanksgiving with an aunt of mine, who also just happens to be an investment broker for Edward Jones. This is a woman who handles various accounts, closely watching the various markets on a daily basis. Though I’ve done a lot of research, I don’t claim to be a true expert- this woman is without a doubt.
The irony here lies in how closely out viewpoints were. I was surprised when she started talking about her views on Disney as a company. I hadn’t mentioned anything about them at that point. However, I had written two large college papers a few months prior depicting my investing strategies; a detailed description of Disney’s operations was high on the list in both.
This was a high point, a confidence booster- to know that such a professional would have the same views I did- neither of my professors seemed too interested. She also thoroughly explained why seemingly unrelated stocks seem to dive and jump at very close time periods; something none of my college instructors could do. But that is for another post.
Success of a Mouse
My high opinion of the companies’ future lies largely with my low opinion of their competition. Simply follow the link I provided above- look at all the industries they operate in. Sure, they have competitors, and many of their competitors do well, but none of them even come close to doing as well in every industry. In the end, the company faces no real threat, and there will always be a market for entertainment.
But don’t take my word for it. Take a look at how they have done up until now (here at the past 10 years). They employ a highly educated and experienced board, and the revenue they pull in annually dwarfs the competition (those numbers are in millions, not thousands, and only the first quarterly earnings).
The future for this company might as well be set in stone; the only way they will fail is if our economy fails, and if that happens- your American dollar won’t be worth anything anyway.
If you notice, they are down 5% YTD- but I can promise you that will not remain consistent. Stocks bob up and down- there are a myriad of factors influencing this (again, another post); it is only natural.
Note: I am providing you with so many links so you can do your own research- I just made it a little easier. Investlopedia offers a free market simulation tool that I encourage you to make use of. This way you are playing the market and getting valuable experience from it, but not loosing any actual money in the process.
- Disney is a great company to invest with, but they are not the only one. Diversify; don’t place all your eggs in one basket. If, however unlikely, they do plummet- you have other streams of income to work with.
- Avoid ‘penny stocks’- no company is going to go public at a cent a share; they are worth so little because the company is on it’s way out. It is rare that any of them recover.
- Unless you know exactly what you are doing as an experienced investor, avoid shorts or longs.
- Options, again, can be tricky and deceiving- they are only for the experienced. Trying to deal with options while having little knowledge of the market is one of the worst things you can do.
- And finally, oddly ignored by most- set up stop orders. These are built as protection devices; your shares will automatically sell (given there is a buyer) if they reach a low point, thus saving you from loosing all of your money. Your stock all of the sudden plummets while you are at work? Poof- no biggy. If you want, your account will automatically purchase assets when they reach a certain point, thus ensuring you don’t miss potential gains.
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