When I started working and saving some money. I thought it might be a good idea to invest, I then remembered to check the fees to be paid for buying shares and discarded the option. Now it is much easier to invest and be well informed, thanks to the internet. At the beginning of 2020, I started to get interested in investing again by watching videos on YouTube. There are some really good channels, but also some that are a bit dangerous or directly looking to scam you.

In this post, I want to make a small introductory guide to investing with what I have been able to learn so far and what I would have liked to know much earlier.

Concepts

  • Compound Interest → interest earned on the initial principal, as well as any accumulated interest from previous periods
  • Central bank → is a government-controlled1 institution that manages a country’s monetary policy
  • Inflation → measure the rate of increase in the general price level of goods and services in an economy over a period of time.
  • Leverage → use of borrowed money to increase the potential return of an investment
  • ETF → investment fund that holds assets
  • Opportunity cost → It’s the cost of the foregone opportunities
  • Volatility → variation of a financial instrument’s value over time
  • Investing VS Gambling → Spoiler, investors win over time.
  • FUD (Fear, Uncertainty, Doubt) → intentional spreading of negative information to manipulate the price of an asset
  • FOMO (Fear Of Missing Out) → fear of not participating in an investment opportunity
  • Operation: buy or sell of some investment asset. For example: buy 10 shares of Microsoft.

General guidelines

  • Inflation eats your money
  • Have a strategy
    • DCA (Dollar Cost Average)
  • Diversify
    • Invest in different countries, companies, sectors, commodities, etc. There are ETFs to make this easy
  • Don’t try to make yourself rich overnight. Fast money is always risky.
  • Be patient. Let compound interest work for you.
    • Before you make any big investment, be confident that you are making the right decision, and have enough conviction to not worry about it if the price goes down.
  • Don’t go “all in” with one price. Remember DCA?
  • Don’t try to time the market
  • More returns mean more risk
    • There are some operations that could have an asymmetrical risk, but think twice and be humble.
  • Don’t Over-Invest
    • Invest only the money that you are not going to need
    • Don’t invest all your money, keep enough in the bank to live for 6 months without any income
    • Avoid leverage
  • The older you are the less risk you should take
  • The market discounts future potential events in the price.
    • This can be a little hard to properly understand, so READ
    • The market tends to the extremes of fear and optimism. More to read
  • Look what they do more than what they say
    • You can check where people like Bill Gates or Warren Buffet put their money
    • Sometimes news is published with the intention of creating FUD or FOMO unnecessarily. Think about the interests of the person who wrote the article.
  • Keep track of each operation that you make. You are going to need it to pay taxes.

  • Be fearful when others are greedy, and greedy when others are fearful.
    Warren Buffett

  • Past performance is no guarantee of future results.
    John Brown

  • Keep learning

Where to invest?

There are many options for investment. Here I list the most common ones 2

  • Bank deposits / Interest-bearing accounts
  • Sovereign debt
  • Real state
  • ETFs
  • Company shares
  • Comodities
  • Crypto

If you are going to invest in cryptos…

  • Know how it works and all the risks associated with it
  • Not all crypto currencies are the same
    • There are scams with good marketing teams
    • Understand that projects can fail
  • Learn how to hold your cryptos

    not your keys, not your coins

  • Watch out for scams. Some red flags are:
    • Returns measured in days or months
    • Recommendations about copy trading, trading bots
    • Safe investments with high returns
    • Comments in social platforms and emails are infected by scams. Be careful!

Some sources of information that I use

I have a few more sources in the Spanish post, but the audio is, of course, in Spanish.

I would like to add

I’m not a professional investor or anything similar. I believe, I can contribute by explaining basic concepts in a simple way, and help people become more aware of how money works to protect their savings.

  1. Depends on the country this could be true or less true. ↩︎

  2. There is a lot of variety in company shares, ETFs, cryptos, etc. I tried to order the list from less to more risky, but that’s impossible because, for example, some company shares, called “penny stocks”, could be a lot riskier than any commodity, or sovereign debt of a country with very high inflation is riskier than the main cryptocurrency (BTC). ↩︎