Balanced Regulation: Listed companies are largely regulated and their dealings are monitored by market regulators, like the Securities and Exchange Commission (SEC) of the U.S. Additionally, exchanges also mandate certain requirements – like, timely filing of quarterly financial reports and instant reporting of any relevant developments - to ensure all market participants become aware of corporate happenings. Failure to adhere to the regulations can lead to suspension of trading by the exchanges and other disciplinary measures.
The first stock market in the world was the London stock exchange. It was started in a coffeehouse, where traders used to meet to exchange shares, in 1773. The first stock exchange in the United States of America was started in Philadelphia in 1790. The Buttonwood agreement, so named because it was signed under a buttonwood tree, marked the beginnings of New York's Wall Street in 1792. The agreement was signed by 24 traders and was the first American organization of its kind to trade in securities. The traders renamed their venture as New York Stock and Exchange Board in 1817. (For related reading, see "The Highest Priced Stocks In America")
Investment ideas can come from many places. If you want guidance from professional research services, you can turn to companies like Standard & Poor's, ValueLine, Morningstar, and other online resources. If the thought of spending your time browsing investment websites doesn't sound appealing, just take a look at your surroundings and see what people are interested in and buying.
Secondly, this is a very vast topic and many people now trade and deal with cryptocurrency as their main day job. Startups and empires are built on it, so please understand this is a beginner’s guide and not the ultimate guide to the galaxy of cryptocurrencies. I will specifically limit myself to cryptocurrencies and will not cover ICOs (Initial Coin Offerings) as these are to me more investments into products or companies yet to be developed. This article will also not cover the relevancy or not of cryptocurrencies, it will not cover the famous Tulip Bubble, or any kind of philosophical concepts.
Finally, one point to mention is that a given cryptocurrency can be listed in more exchanges, with different listing prices (see below – Arbitraging). The best place to look for a cryptocurrency listing in term of total market capitalisation is Coinmarketcap. Cryptocurrencies are listed per descending order of market capitalisation; the site also allows to deep-dive on each cryptocurrency to see their value over time and where they are listed. Some cryptocurrencies may be listed on several exchanges but only 1 or 2 exchanges may see the critical mass of transactions taking place.
Investing is a way to set aside money while you are busy with life and have that money work for you so that you can fully reap the rewards of your labor in the future. Investing is a means to a happier ending. Legendary investor Warren Buffett defines investing as "… the process of laying out money now to receive more money in the future." The goal of investing is to put your money to work in one or more types of investment vehicles in the hopes of growing your money over time.
Before you start buying cryptocurrency, you must understand some concepts about investing. Remember, cryptocurrency markets are not regulated, so investor sentiment is aggravated by rumours, people spreading false information, « pump and dump » actions, « sell walls », FOMO (fear of missing out) and all sorts of manipulations including insider trading. Knowing these will hopefully help you rationalise your actions.
In terms of diversification, the greatest amount of difficulty in doing this will come from investments in stocks. As mentioned earlier, the costs of investing in a large number of stocks could be detrimental to the portfolio. With a $1,000 deposit, it is nearly impossible to have a well-diversified portfolio, so be aware that you may need to invest in one or two companies (at the most) to begin with. This will increase your risk.
On when to buy, my recommendation is to avoid jumping into the pump train when you see a cryptocurrency price rising very fast. Fear of missing out is a very potent psychological trigger for us humans and if you see something rising fast the first thing you’ll want to do is buy some so that you don’t feel left out. Go for the dip, but go for the dip reasonably: identify the cryptocurrencies you want to own, ideally solid ones based on your own research (it’s important not to invest in crappy projects), and when you see them taking the plunge go grab some big chunks.
Finally, keep in mind that if trading on margin—which means you're borrowing your investment funds from a brokerage firm (and bear in mind that margin requirements for day trading are high)—you're far more vulnerable to sharp price movements. Margin helps to amplify the trading results not just of profits, but of losses as well if a trade goes against you. Therefore, using stop losses is crucial when day trading on margin.
You should be aware of the risks involved in stock investing and you use the content contained herein at your own risk. Neither Trade Achievers nor any of its suppliers guarantee its accuracy or validity, nor are they responsible for any errors or omissions which may have occurred. The analysis, ratings and/or recommendations made by Trade Achievers and/or any of its suppliers do not provide, imply, or otherwise constitute a guarantee of performance.
Sell walls: the action of artificially keeping the price of a cryptocurrency asset low by placing a large sell order. Large financial operators or investors (nicknamed « whales ») may want to artificially keep the price of a cryptocurrency low so that they can keep accumulating quietly, without causing a sharp rise in price. These are called « walls » because on exchanges, the graphics showing offer and demand will show a very high « wall » on the offer size. The mechanism is that the investor will put a very large sell order (usually 100 to 1000 times more cryptocurrency units than regular orders). Because of how exchanges operate, the sell will only take place if there is sufficient demand to fulfil the entire order, so smaller operators who have a real need/urge to sell would have to sell below that wall (i.e. cheaper) to make sure they can get paid. This will cause a condition where the price will stagnate, allowing those whales to put as much smaller buy orders as they need. Sell walls may be removed once the buying whales have reached their objectives.
Diversification allows you to recover from the loss of your total investment (20% of your portfolio) by gains of 10% in the two best companies (25% x 40%) and 4% in the remaining two companies (10% x 40%). Even though your overall portfolio value dropped by 6% (20% loss minus 14% gain), it is considerably better than having been invested solely in company E.
If you have a job, your employer may offer a 401k or 403b retirement plan as part of your benefits package. These accounts invest your money for retirement, but your investment options are limited to the choices provided by your employer and plan provider. If your employer doesn't offer a retirement plan, you can open an IRA on your own with your bank or brokerage company.
When thinking about the mindset of investors, The Great Crash 1929 by J.K.Galbraith (reviewed here) should also be required reading. Typically, any sustained fall in prices - known as a bear market - is very destructive to wealth. However, as Galbraith explains wonderfully, each bear market is unique and is a reflection of the bull market that came before it. The book explains a great deal about the feedback loops that can exist when prices rise and fall as more people are either sucked into or forced out of holdings. It is the reference work about a very important slice of Wall Street history.
Before you raise your hand to complain, yes, we know that a computer can track price changes much better than most humans. We get it. But the aim of the exercise is to get a 'feel' for the movements in price and that is unlikely to happen by using a computer program and pressing a button. We are talking here about stocks for beginners, and beginners need the learning experience, not the quick fix automation. Just trust us...
But building a diversified portfolio of individual stocks takes a lot of time, patience and research. The alternative is a mutual fund, the aforementioned ETF or an index fund. These hold a basket of investments, so you’re automatically diversified. An S&P 500 ETF, for example, would aim to mirror the performance of the S&P 500 by investing in the 500 companies in that index.
An asset class that your author has been researching substantially is cryptocurrency. Bitcoin and the other alt coins, appear to be like very few other investment assets and so far moves in very different ways to almost every other asset. While it is very volatile and high risk and has quite a learning curve, it might be useful for some investors to understand and add to their portfolio.
This education really ought to include one of the daily papers that covers the movements on the stock exchange (information here) in detail, such as the Financial Times or Wall Street Journal. Remember, the investment bankers that you are competing against have Bloomberg terminals and Reuters subscriptions, while everyone else is watching CNN and MSNBC. Since everyone is reading the same things on the same days, these might not be the best places to pick up your share market tips...
By understanding your risk tolerance, you can avoid those investments which are likely to make you anxious. Generally speaking, you should never own an asset which keeps you from sleeping in the night. Anxiety stimulates fear which triggers emotional responses (rather than logical responses) to the stressor. During periods of financial uncertainty, the investor who can retain a cool head and follows an analytical decision process invariably comes out ahead.