Kelvinwright's Blog

postmodern thoughts

Stock market trading made easier in the 21st century

ImageFirst of all, very late though it may be, Happy New Year to you all!

Having set my new year’s objectives, I found an article linked to one of them, reporting that the majority of people under 50 were not thinking enough about how they would survive financially when they retire. With life expectancy increasing, surely should people start thinking about a pension much earlier, and not later?

I few years ago I began thinking about my retirement, despite being 30 years from it happening. How could I make enough money to achieve my goals in retirement? How much money will I need to earn in my retirement? I have a pension, but I don’t want to throw all my eggs in one basket.

Which brings me to the topic of this blog. I began looking at the stock market (in my case the Spanish stocks on the Ibex). I asked myself, is it really so difficult to trade? Do I really need to be a Gordon Gekko to understand the stock market and make it work for me? Do I need the wealth of Warren Buffet to be able to trade?

Anybody can invest in the stock market, and for as little as £50/€50 per month. I know, because this is how I started investing in the Ibex in 2009, just as it was crashing. I’m still investing, and I haven’t been burned (although I have made mistakes), despite trading at the worst possible time. How did I do it?

First, I decided on my financial goals and my strategy, and my reasons for investing: to start a retirement fund that I could control. What were my timescales? Any goal needs to be timed. I started at 37 years. So I had 30 years to do it. How much money did I need to invest monthly/annually to achieve my goals? It’s easier to begin saving now, than wait until retirement is just around the corner.

As for my strategy. I wanted to be able to earn a nice income from the dividends of my shares, remembering that I had 30 years to achieve it. I personally wouldn’t recommend buying stocks to sell them in the short term with the aim of making a quick buck. There are far more people who know far more than I do about the stock market. Those that buy to sell at a short term profit are probably following its movements minute by minute. At best I can check it at lunch time and at opening and closing. I have a job that prevents me following the minute by minute changes.

Next, I had to think about risk. As a lecturer told me at University: The more you can win, the greater the risk, and thus the more you could lose. I decided only to invest each month what I could afford to lose. That’s to say, not to invest everything in the stock market. I decided to spread my savings around.

And of course, we should remember some of the words of Gordon Gekko: I don’t throw darts at a board. I bet on sure things. Read Sun-tzu, The Art of War. Every battle is won before it is ever fought. Information is gold, and thanks to the internet, there is a lot of information available. The current profit of the Ibex 35 is around 4.5%, and this in the middle of a crippling crisis. Which companies would pay me a consistent and decent dividend over the long term? I won’t throw complex terms in here like yield, because I didn’t know them when I began. I started looking at companies I might like to invest in, at sectors. In the same way that I would not invest all my saving in the stock market, so I didn’t want to invest in just one stock or one sector.

This is not a recommendation of what you should do. It’s simply the story of what I did, based on my goals, my funds, and my reading. I read one book on stock market investing, and took just one useful thing from it: everybody will try to offer you advice about what you should do, what you should buy, when you buy or sell. It seems that everybody is an expert. People will say that they ran an online simulation and earned XXX%. Run your own simulation, and look for your own information. It’s unlikely that I’d take medical advice from somebody that isn’t a Doctor. Why should I take financial advice from somebody who isn’t an expert? I can ask, but at the end of the day it’s my money, and I’m assuming the risk.

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January 19, 2013 - Posted by | Uncategorized | ,

1 Comment »

  1. Totalmente de acuerdo, Kelvin!

    Comment by Bárbara | January 22, 2013 | Reply


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