Start-Up Investor Guide

Start-Up Investor Guide

*This is not financial advice.

Here's a breakdown of a document I created for close friends and family who don't know where to start with investing. Some of the lingo, trusted platforms, and tips in 1 document can go a long way. I just wanted them to have access to something to help get started. Our post we shared a few days ago hinted at a few things from this doc. Link to post.

I know this is just scratching the surface but it has shown to be a good place to start for some people close to me.

Common Asset Sectors

• Stocks/ETFs *preferably with dividends
• Bonds
• Cryptocurrency (blockchain)
• Commodities
• Precious Metals
  • Gold
  • Silver

Free Resources

• Blockfolio (mobile app) - cryptocurrency portfolio simulator
• Precious Metals Savings Club - free online resources and start-up guide I created for novice precious metal investors (must view with Google Chrome browser)

Noteworthy Exchanges, Brokers and Platforms

Precious Metals

• Local dealers found on usmint.gov, very trustworthy source
• GoldSilver.com (Also a great resource) - online bullion dealer
• Karatbars - E-commerce based gold ecosystem that allows members to exchange cash for IRA grade gold bullion. Priced at a premium but allows tax advantages as a home-based business. Also has a crypto project (KBC) that has performed well.

Stock Market

• Robinhood (mobile app) - great stock trading app for beginners, first broker with free trading (no commissions) along with no purchase minimums
• M1 Finance - newer platform that has more functionality than Robinhood, allows you to buy partial shares
• eTrade - reputable online stock broker

CryptoCurrency

• Coinbase - mobile and online wallet and beginner trading platform, should only be used for making initial USD to crypto exchanges because of high trading fees,
• Exodus - high-quality wallet and trading platform, must download file for use, can only be used on desktop
• Binance - trusted trading platform, considered to be the biggest crypto exchange

Suggestion Before Getting Started

Pay off debt, especially debt that is incurring interest!

Prerequisites

• Determine how much money you are willing to save and invest (upfront and monthly)

• Assess your risk tolerance (what you are willing to lose to increase chances of big gains)

• Don’t Blindly Diversify

• Shows a lack of confidence

• Lessens chance of winning big

• Creates too much data to track

• Prioritize some liquidity in each asset class to take advantage of buy-in opportunities

• Choose a sector (tech, commodities, energy, etc.) to specialize in and commit time to research

  • History
  • Current events and trends
  • Market Leaders

• Learn to read a basic market chart, as it utilized to display value across all asset classes

• In general, Buy Low and Sell High (don’t buy at all-time highs)

• Maintain your focus but don’t fall too deep into one rabbit hole

• Don’t invest heavy into high-risk investments, and look to hold them for the short term

• Minimize/avoid fees, commissions, taxes, etc. and be sure to document all such infractions(for records and tax purposes)

• Schedule weekly and/or monthly assessments to track ROI and gains/losses

• Use online tools to set up price alerts

• Be prepared to trade across asset classes (uncorrelated) to prevent big losses, secure profits and promote large gains

• Always be aware of your principal investment (for entire portfolio and each asset class)

• Have an exit or reentry strategy for each asset class and a long-term strategy to convert intangible assets (stocks, crypto, etc.) into hard assets (real estate, property, businesses, etc.)

Basic Definitions

Bear Market: This is trading talk for the stock market being in a downtrend or a period of falling stock prices. This is the opposite of a bull market.
Blue Chip Stocks: These are the large, industry-leading companies. They offer a stable record of significant dividend payments and have a reputation of sound fiscal management. The expression is thought to have been derived from blue gambling chips, which is the highest denomination of chips used in casinos.
Broker: A person who buys or sells an investment for you in exchange for a fee (a commission).
Bull Market: This is when the stock market as a whole is in a prolonged period of increasing stock prices. Opposite of a bear market.
Bullion: Precious metals in the form of bars or coins that are at least 99.5% pure.
Capital Gain/Loss: The profits or losses from the sale of an asset. Gains are taxable and losses are tax-deductible.
Coin Face Value: a monetary value that is physically stamped on a coin (not the intrinsic value)
COMEX: major commodities exchange where gold/silver are traded (NY).
Cryptocurrency Exchange: A platform where digital currencies are exchanged for fiat or other currencies
Day Trading: The practice of buying and selling within the same trading day, before the close of the markets on that day.
Exchange: An exchange is a place in which different investments are traded. The most well-known in the United States are the New York Stock Exchange and the Nasdaq.
Hard Asset: A tangible investment that holds intrinsic value
Hedge: a transaction initiated with the intent of protecting an existing or anticipated market exposure from adverse price fluctuations.
Initial Public Offering (IPO): The first sale or offering of a stock by a company to the public, rather than just being owned by private or inside investors.
Liquid Asset: An asset that can be easily converted into cash in a short time, with little or no loss in value.
Market Cap: The total value of all a company's outstanding shares.
Moving Average: A stock’s average price-per-share during a specific period of time. Some common time frames viewed in the stock market are 50 and 200-day moving averages. In crypto they tend to be much smaller
NYSE: The New York Stock Exchange is the world’s largest exchange located in New York City
P/E Ratio: The ratio of a company's share price to the company's earnings per share. The ratio is used for valuing companies and to find out whether they are overvalued or undervalued.
Paper Asset: Investments where ownership is represented on paper or digitally (stocks, bonds, currencies, etc.)
Portfolio: Entire collection of investments owned by an investor.
Premium: Dollar amount or percentage an asset sells over its intrinsic value.
Principal: The dollar amount put into an investment or borrowed on a loan
Quote: Information on a crypto, stock’s latest trading price.
Rally/Surge: A rapid increase in the general price level of the market or of the price of a stock.
ROI: Return On Investment. Calculate before making any investment. ROI = (Gains - Cost)/Cost
Sector: A group of stocks that are in the same business. An example would be the “Technology” sector including companies like Apple and Microsoft.
Spread: This is the difference between the bid and the ask prices of a stock, or the amount someone is willing to buy it and someone is willing to sell it.
Spot Price: The daily fluctuating market value of precious metals. When investing, your total cost will be “spot price + premium”.
Ticker/Symbol: A multi-character, alphabetic root symbol, which represents a publicly-traded company on a stock/crypto exchange.
Troy Ounce: The basic unit of weight for precious metals. One troy ounce = 31.1035 grams or 480 grains
Volatility: This refers to the price movements of a stock or the stock market as a whole. Highly volatile stocks are ones with extreme daily up and down movements and wide intraday trading ranges. This is often common with stocks that are thinly traded, or have low trading volumes. The rate of volatility is extremely high in cryptocurrency.
Volume: The number of shares of stock traded during a particular time period, normally measured in average daily trading volume.