Would you like to follow my stock portfolio, increase profits and reduce risk? Most financial advisors will tell you to invest in ETFs. While this is not a piece of bad advice, I’m sure you could earn much more by investing in stocks. You can also buy shares in various ETFs, especially if you don’t know how to invest by yourself.
I like to combine both! Investing in stocks (especially value stocks and dividend stocks) can be very rewarding, but it is riskier than investing in ETFs. But, buying shares in ETFs can help you diversify your portfolio and reduce the overall risk. But let’s start with some basics first…
(If you already understand the basics, feel free to scroll down and see how can you follow my stock portfolio)
What Is Investing?
Most of us were taught that you can earn money only if you start working. One big problem with this approach is that, if you would like to make more money, you will have to work more hours and there is a limit to how many hours we can work. Another problem is that, even if you work hard to make more money, you will not have enough time and energy to enjoy what you earned.
The only way to solve these issues is to put your money to work for you. Investing money means that you will buy stocks, mutual funds, real estate, or even start your own business in order to make even more money. All these investments involve some risk and different types of investments involve different levels of risk. This means that you could earn money with your investments, but you can also lose it if you make the wrong decisions.
Investing and gambling are not the same. Gambling means that you are putting money at risk by betting on an uncertain outcome. On the other hand, true investing doesn’t happen before you do some actions on your part, like for example analyzing the stock you would like to buy.
Even if you analyze the stocks properly, there are still some risks involved, but if you diversify your investments, the risk will be much lower. So, for example, instead of buying stocks of just one company, you could buy 10 or more different stocks. This follows the principle of „not keeping all your eggs in one basket“ and it can help to reduce your overall investment risk. So, if your portfolio is well-diversified, it means you’re less exposed to a single economic event. That being said, if one sector or asset performs badly, you won’t lose all your money.
The Power Of Compounding…
Albert Einstein once said that the compound interest is the most powerful force in the universe:
“Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”
Compounding is the process of using earnings made by your investments to buy even more investments. Compounding requires two things: the reinvestment of earnings and time. The more time you give your investments, the more you are able to accelerate the income potential of your original investment.
Let’s have a look at an example:
If you invest $10000 today at 10%, you will have $11000 in one year ($10000 x 1.10). Now let’s say that you don’t withdraw the $1000 gained from interest, but instead, you re-invest it and keep it in there for another year. If you continue to earn the same rate of 10%, your investment will grow to $12100 ($11000 x 1.10) by the end of the second year. Because you reinvested that $1000, it works together with the original investment, earning you $1100, which is $100 more than the previous year. This little bit extra may seem like peanuts now, but let’s not forget that you didn’t have to lift a finger to earn that $100. If you continue re-investing, after the next year, your investment will be worth $13310 ($12100 x 1.10). This time you earned $1210, which is $210 more interest than the first year. This increase in the amount made each year is compounding in action: interest earning interest on interest and so on. This will continue as long as you keep reinvesting and earning interest.
What If You Don’t Have Money?
Different investments require different sizes of starting capital, but usually, you can start with only a few hundred bucks. There are actually three ways to find the money for your first investment:
- Earn more
- Save more
- Do both
There are 3 interesting posts I wrote on my blog, that can help you make/save some money fast:
- How To Make 100 Bucks Fast? 21 Ways To Earn Some Quick Cash
- How To Save $1000 In A Month? 7 Easy Tricks To Save More Money
- 10 Easy and Fun Money Saving Challenges You Can Start Right Now
How can you follow my stock portfolio?
The first thing you have to do is to signup for an eToro account. eToro is an online broker that allows you to invest/trade on your own, or copy portfolios of other investors/traders.
The next thing you have to do is visit my portfolio page and click on “Copy”…and that’s it.
But please be aware that I am a long term investor, not a day trader. So, don’t expect to get rich quickly. Follow my portfolio for at least 3-5 years if you want to make money.
Here is my investing strategy:
- Investing in stocks and ETFs only
- Focused on value and dividend stocks
- Long-term oriented
- I avoid leverage and shorting
- I avoid high-fee instruments