By Marcus de Maria, Founder of Investment Mastery.
For many of us, our lives are already mapped out from the get-go. Go to school, college, then potentially university, get a job and mortgage, whilst spending the rest of our lives paying it off to enable us to have a comfortable retirement.
This is the pathway we have been led to believe we should follow, and many do blindly follow, chained to their desks to pay their mortgage or bills, spending their disposable income to get a better car, bigger house, or enjoy a couple of weeks in the sun.
But for me, I wasn’t happy with this pathway. I didn’t want to be forever paying off a mortgage and saving for a few precious weeks of holiday each year. I wanted more.
So, I took the plunge and started investing – but fell hard and lost a lot of money. Why? The reason was I didn’t educate myself first. I didn’t have a strategy and I didn’t seek advice from others who had done it before me. Why do people go to university for 3-4 years, study to become a doctor or dentist for 5-7 years or an accountant for 4 years? Because training and education are essential, and the same can be said for the stock markets.
Once I had learned this (the hard way), I worked hard to educate myself and started building my own new pillars of wealth.
Investing isn’t a get-quick-rich scheme. For most, it is not an alternative to working or a reason to quit a lucrative career. It is quite simply another pillar of wealth that gives you the freedom to live a life of more choice. Investments will ripen over the years, and we advise starting as early as possible to ensure you have maximum funds for later in life, when children, ageing parents and retirement can all affect finances.
The other thing to remember when investing is the level of risk. We say you should never invest any more than you can afford to lose and to keep perspective, as markets are likely to go down as well as up. Investing alongside working in a secure job role is the best option, as you can then funnel small chunks of money into your portfolio each month.
Here are some tips to build a new pillar of wealth:
Where to invest – are you interested in stocks, precious metals, commodities or Cryptocurrencies? If stocks, which Stock are you entering and why? If Crypto, do you know enough in such an unregulated or volatile asset class? Is it on a technical basis where you like the chart pattern or a fundamental basis where you think the company has long-term growth potential?
What price to get in at – I prefer buying low, so I set an order in advance and allow the price of the Stock or Crypto to fall to my entry point. Sometimes I will wait weeks, even months, for this to happen. But I wait because those are the rules.
When to exit with a profit – I know in advance when I am exiting the trade or when to exit with a small loss. So, in order to ensure I am doing the right thing when the Stock is falling, I enter with an automatic order below my entry point, called a ‘Stop Loss’ or ‘Limit Sell Order’ in some cases, to minimise my losses.
How much to invest – this is part and parcel of keeping risk low. I ensure that by the time the stock price falls to my predetermined stop loss, I will only be risking 1% of my portfolio. So, if I have £10,000 to invest, I would only risk 1% or £100 on any one trade. It’s a mathematical equation EVERYONE should know before they start trading. Unfortunately, very few people know this equation, and even fewer utilise it.
For anyone wanting to secure their financial future, increase their pension pot or simply live a life of more choice, building another pillar of wealth is key. Get educated, keep the risk low and be prepared to be in it for the long term – you may be surprised at the results!