Reasons to invest in your future. Understanding the importance of pensions and savings.

What is investment?

What is passive investing?

  • learn everything you can about brokers (and how to choose them)
  • understand the way your savings accounts work (ISA, SIPP)
  • diversify your funds — as a rule of thumb, I aim to stay between six and eight (or an absolute maximum of ten) funds. Currently, I’m working with eight.

What are index trackers?

What are ETFs?

What is Active Investing?

Active investing pros and cons

  • Much higher potential returns — due to the nature of active investing, it is possible to achieve much higher returns than other methods a lot quicker
  • Short-term opportunities — active investing allows you to quickly leverage undervalued market sectors for a quick turnover
  • Professional risk management and high degree of control — you have a lot more control over your active investments and can benefit from the help of professional risk managers to mitigate some of the downsides
  • Much higher fees — due to the aforementioned human factor, active investment is much more involved and therefore comes with considerably higher fees than its passive counterpart.
  • Higher taxes — active investing generally provides more taxable income, making it a bad choice for beginners
  • Higher skill floor — active investing requires a lot more knowledge, skills and, of course, initial capital, to get started with

Investments in Individual Stocks and Buying shares on The Stock Market

  • Income statement
  • Balance sheet
  • Cash flow statement

How to get started with Stock Market Investing in 6 simple steps for Passive and Active Investments:

When to sell:

  1. When you see that another company has performed better and it seems to present you with better investment opportunities, then you can sell some of your existing investments to buy shares in it
  2. When the company changes its fundamentals — If the company seems headed in the wrong direction, change their business plan, lose money, or seems to amass more debt than cash, you carefully assess their balance sheet. If they aren’t generating enough cash, it’s time to move on.
  3. When the stock is overvalued — if their PE is 30-, it’s time to move on.
  4. When you can tap into a new, more competitive market- tech, for example, is performing really well right now.
  5. When you feel a recession is just around the corner — this requires a lot of experience to truly judge, and you will never know for sure when this is going to happen, but if all the signs are pointing towards it — it’s time to move on and keep cash!
  6. When drastic management changes take place — company takeovers, CEO and management team changes or similar events can drastically alter the course of a company, taking us back to point 2.
  7. When the growth rate of the company slows down, it might be time to look for greener pastures.
  8. When major political changes occur — if your chosen industry falls under political scrutiny, it’s generally best to cut your losses get out while you can.

When to buy:

  1. When you have a long term prospective- if you have reason to think that the company will do well in, say, 5 years time, and you are confident that the industry will remain up to par (ask yourself — will there be interest in the given product or field. Good examples of worthwhile companies are: Microsoft, Google, Facebook, Apple, Walt Disney Studios, etc.) Note — there are ways to calculate what the value of your investment will be in 5 years
  2. When the stocks are stable and understandable
  3. When the stock is managed by great leaders
  4. When the stock is undervalued
  5. When the company hasn’t accumulated too much debt and has a lot of cash (take a good, hard look at the balance sheet, income & cash flow statements)

Dealing with Stock Market Falls

  • Don’t be afraid — market falls (and crashes, for that matter) can and will happen. There’s nothing you can do to stop that and you can’t afford to live in a constant state of fear over them. When the market drops, just remain calm and patient. If and when you do decide to sell, make sure that you’re not selling at a loss.
  • Use that time to further study and analyse the company. Figure out if they’ve got the potential to grow in the long-term.
  • Try to always buy on sale — just like with other kinds of shopping, you should be trying to get the best deal whenever possible.
  • Start small — when you’re just starting out, invest small sums of money and focus on understanding how the business works before fully committing.

How it all started for me

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Antoaneta Tsocheva

Antoaneta Tsocheva

Entrepreneur and eco-friendly enthusiast. I’m on a green mission to clean up the way we live. Share the passion — follow my journey now! http://bit.ly/2FloQoQ