There has never been a better time to be an investor. Period. The internet has not only democratized information relating to investing, but has also created a lot of competition between brokers vying for your business, bringing the fees associated with investing to an all-time low.
- 1. Investing 101: Introduction
- 2. Investing 101: What is Investing Anyways?
- 3. Investing 101: Understanding Compound Interest
- 4. Investing 101: The Myths of Investing
- 5. Investing 101: Investing and Technology
Buying and Selling Stocks.
Back in the day, if you wanted to buy a stock you either had to call your stockbroker or show up physically to the actual stock market. Commissions were basically fixed and because of the lack of information and options, investors wouldn’t know how things were going until weeks later when they received their statements in the mail.
In some ways, with how we invest, not being able to get a stock quote for weeks on end is an advantage. If we wouldn’t own a stock for ten years, then we shouldn’t even be considering it. To invest well, you need to be okay with buying a business and having the stock market close for ten years. I’ll explain more on this later.
There’s all sorts of information available on which brokerage is right for you. I personally use Interactive Brokers, but they are not for the faint of heart. If you’re just starting out, I would suggest Questrade for those of you in Canada, and Ally Invest if you’re in the U.S.
Commissions typically range between 0$ and $5. Robinhood, a “commission free” broker, makes money through margin debt and premium accounts etc. things we wouldn’t touch with a ten foot pole. Better to pay commissions to keep the brokerage afloat and not be tempted with margin or any of that funny business offered through “free” brokerages.
Nothing is ever free.
Many brokerages have all manner of ways for you to check your investments, but I see this as a negative in a lot of ways. Remember, brokerages make money on transactions, albeit it’s a decreasing part of revenue, but it’s to their advantage for you to be active. When we invest like Warren Buffett, we want to be as IN-active as possible. Checking the stock price everyday is not investing. It tempts you to act and is just bad for your financial health. If you owned a rental property, you wouldn’t be calling your realtor to check the price for you everyday, the same should be true of businesses.
“The big money isn’t in the buying or selling, but in the waiting..” – Charlie Munger
All the information you need to make informed investment decisions is widely available for free through sites like Yahoo, Morningstar, and company websites to name just a few. A good rule of thumb is to only log into your brokerage for placing orders.
I should mention Robo advisers too. They’re like mutual funds and etf’s in many ways, and unfortunately, are simply another way to abdicate responsibility.
If you’re seeking any sort of decent return, Robo advisers are not your friend.
They’re basically an electronic fund manager, so cheaper, but still as ineffective.
Why? Because Robo advisers use the same efficient market theory as fund managers to make investment decisions.
New lipstick, same pig.