BEFORE YOU BUY STOCKS - Free E-Book

Consider these points before you start buying stocks:

Circle-up SHARKS, it’s time for a quick prep course on entering the stock market.

You don’t make it to the top of the food chain without knowing your environment – the opportunities, the hazards, the lay of the land. Here the brutal facts on why new investors lose money in the stock market:

❑ Not doing proper research

❑ Going for touchdown passes on every play

❑ Ignoring fees

❑ Not diversifying or having a strategy

❑ Complicating your investing

❑ Panic selling and FOMO buying

This eBook is going to cover some of the many things that a new investor should consider before putting their money on the table in the hopes that it helps you develop good habits early. We want you to be successful! Investing time into this kind of research is vital and we hope that you find value in this eBook from SHARK INVEST! Now, let’s DIVE IN!

Schoolhouse Rock wasn’t pulling your fins; for SHARK INVESTORS, knowledge is the Top-Tuna. If your goal is to put your money in the mattress and watch it shrink, read no further. If you want to put your money to work in investments that have the potential to grow while you are sleeping, let’s talk turkey.

For many people, the first thing that comes to mind when they think about “investing” is the stock market. For many younger would-be investors, they may also lump in crypto-currencies, NFTs, and Pokemon cards. The common thread connecting all of these is that there is a balance of risk and reward that we must achieve.

In this eBook, we’ll be focused on STOCKS, though many of these points are easily applied to other investments. The goal is to arm ourselves with as much useful information as possible with which to direct our investment activities and put our money to work.

Harsh? Yes. Necessary? Absolutely. We are constantly amazed with how many people are waking up in their 30’s and realizing that they’ve had their finances on autopilot since they started receiving a paycheck. Money goes into the bank on payday, they pay the bills, the landlord cashes the rent check, and they hope there’s some money left for the weekend. Your situation will certainly be particular to you, but if you aren’t in the driver’s seat on your finances, bad habits (like cash advances, online spending, and over-paying for streaming services to don’t even watch) will creep in and start robbing you blind.

Hey - we’re here to help. Step one? Get your financial house in order. Check out our eBook on how to: STOP SPENDING and START INVESTING!

Many financial planners will advise their clients to set aside between 10% and 15% of their annual income for saving and investing. If your company offers 401K matching, this can be a great way to accelerate your savings. Deducting a 401K contribution from your paycheck automatically can support any finical discipline issues you may have.

Here are a few resources that may help put you on track if you struggle with paying down debt and setting your budget.

Once you have that covered, it’s time to start considering funding a savings / investment account! There are plenty of zero-minimum platforms available, so you can get started with minimal funds. Be aware that most of these platforms incentivise a minimum account balance with sign-up bonuses and fee-waiving.

There are many types of accounts that can serve as your home-base for investing and you may use one or all of them depending on your investor and tax profile. You’ve heard of most of them: Brokerage, ROTH-IRAs, 401K, 529 Savings, and Custodial Accounts.

Some of these accounts have significant tax benefits. Depending on where you hold your stocks, there are different tax implications for your gains and losses. There can also be limitations on when and how you can access your money. Look into the ones we mentioned and chose what is best for you.

Your employer will likely offer options based on your risk tolerance, but these will be mutual funds or managed funds. If you want to pick your own individual stocks or be an active trader, you’ll want to establish your own accounts outside of your 401K.

There are many platforms to chose from and they all offer their own value proposition. Some questions you’ll want to ask in making a decision on your trading platform should include:

• Accessibility / Interface: how will you access your accounts and make trades? Will you use your phone? Laptop? Local bank branch? You want to make sure that your platform / broker provides service in a manner that suits your needs

• Fees: What are the costs involved? Do they charge access fees, flat rates, commissions, annual service costs? • Support: is there technical, analysis, or financial advice offered? Online, phone, afterhours support?

• Market Access: will you have the ability to buy stocks on multiple exchanges (NYSE, TSX, etc.)? • Services: you may want to explore call/put options, crypto-currencies, etc. Can the platform can handle these items and do they offer analytics tools?

• A small consideration is sign-up incentives – but these are generally negligible over the life of your account. They are usually just marketing chum to lure new sharks.

Picking a single stock in the market, unless you have a deep understanding of the company and their future performance potential, takes a serious amount of research and attention.

Sure, there are YouTubers who will spout their “TOP 5 STOCKS TO BUY NOW” daily. You might feel tempted to jump on a hype-train or two. We’ve all done it. In my years of investing, I have seen myself make many mistakes – most of them involved buying a stock before I had ‘enough’ information… but I digress. Stock picking is difficult and SHARKS need to be selective and strike efficiently.

Have you heard of indexes, mutual funds, managed funds, or ETFs? These are terms to you should learn. Of course, you’ve heard of the DOW and the S&P500 – anyone who has watched ten seconds of cable news knows these names. What are they? What is an Exchange Traded Fund? Is it the same as a broker managed fund? We’re not going to define everything in this eBook – the message here is: MAKE A LIST.

There will be hundreds of terms, abbreviations, and acronyms that you’ll hear and want to look up. BUILD YOUR VOCABULARY. In a nutshell, funds, (passive and managed) are a group of stock holdings that you can buy and sell as a bundle. The contents may change day to day, and this will have an impact on the price of the bundle. Our key note: learn about fees and be careful about who you pay to manage your investment. Funds can be an efficient way to gain a position in an entire industry without selecting individual stocks. OR – follow a fund that reports its trades and learn from the sidelines.

DO YOU NEED A BROKER? Working with an established broker with lots of positive reviews can be good when starting out. Beware of fees and commissions (these suits don’t work for free!) and determine if you meet their specs for opening accounts. Some have minimum account balances that may weed out the average investor. Determine if the services that a brokerage offer are suited to your needs and if you are willing to pay for those services. There are plenty of other options that allow you to buy and sell securities and options on your own.

As mentioned, there are plenty of phone-based platforms that offer trading with zero commissions. Wherever money is moving, there will be companies skimming profits off the transactions.

We use several of the zero-commission trading apps. They’re fine. However, keep this in mind: When you get the product for free, YOU ARE THE PRODUCT. Write that down, digest it, accept it. Robinhood caught heat in the news when details of their revenue streams emerged – it seems that they sell their member’s trading volume in order to turn massive profits. Do the traders pay more for the zero-fee purchases? We still don’t know. Just do your research and question everything as usual.

“Hey – have you heard about DOGE COIN? Dude, it’s going to the MOON. I bought a pile of it and I’m already up 500% in three days! EASY MONEY BRO!”

Is Carl from work killing it in the stock market? Maybe. Maybe not. He may have some great stories and constantly have news about how his stocks are up, up, up, but trust me on this – most people are only giving you the highlights. For every stock market or crypto millionaire, there are a hundred folks who didn’t fare so well. ALWAYS carry the largest grain of salt when listening to your friend’s (or YouTubers’) stock win stories.

It’s okay to work with trends and take advantage of hot leads (we do this plenty at SHARK INVEST). Just ensure that you are not only swimming with the school, but that you are strategically picking off the slow swimmers and heading home when your belly is full.

Just like a casino, the big rewards come only to those who take the most risk. If you plow your life savings into an unknown stock that goes on to rule the market, sure, you may be stacking ‘tendies’ (that’s jive for ‘legal tender’ to those who are just joining us). Chances are good that you will follow a learning curve in your stock picking and that you’re going to have ups and downs. The best advice we can give here is to be dispassionate, ruthless, and relentless. Invest only what you can afford to lose and calculate your risk with the best information available.

Trading in and out of stocks with rapid frequency may be frowned upon, but SHARK INVEST actually doesn’t mind that. We’re more focused on feeding when the gettin’ is good and moving on when trouble’s shadow rears it’s head. Is this the strategy you should adopt? Up to you. There are as many trading strategies as there are traders. That said, there are many companies we believe in and have a much longer outlook on. As a foundation, we like to own companies that we understand and have a very high conviction in their future potential. Others are higher risk, quick hitters, where we ride the wave and fill our bellies before leaving the scene.

Not only is this my favorite heckle for a struggling live musical act, it is solid advice for new investors. You don’t need to own hundreds of individual stocks to do well in the market. Quite the contrary, famed investor Warren Buffett is notorious for his view that you really only need a handful of great stocks in your portfolio to out perform the market. Some people are ALL-IN on one stock. Others own thousands of small positions.

It’s really about what you feel is best for your investing. When starting a new portfolio though, we’d prefer to go with three or less companies that we follow closely and understand their business. That’s exactly how we got started, and for the first year, we held only three companies – three companies whose DNA we understood and have continued to hold strong. From there, we have expanded our knowledge base and found other interesting companies and funds.

It’s worth noting; new investors should consider avoiding companies and industries that don’t know much about. Watching a three-minute video on lithium mining does not an informed investor make. Give it a few months and dig deep. Know the competitors. Read the quarterly reports. Act like you are buying the entire company, even if you are only picking up two shares. Know what your plan if the stock increases OR DECREASES in value. Whew. Big topic there.

INVEST YOUR TIME BEFORE YOU INVEST YOUR MONEY. Paper-trading. It’s like a training dojo for your trading skills. Take something you do each day that wastes 30 minutes of your life - watching “Friends” for example (utterly useless) and commit that time to reading headlines and analysis on your favorite companies. Watch a breakdown or two by a solid and honest YouTuber or stock analyst, and think about what you may do in response. Use a free platform like Yahoo Finance create a ‘fake’ portfolio, and start playing around with trades. Kids are doing this in school now – amazing! The more real you make this and more seriously to take it, the more you will learn about your instincts and the quality of your research. Start with $10,000 in made up money and start trading it.

When you actually put some real skin in the game, you’ll already know your stocks or funds and what to expect in terms of volatility. Be patient. Getting good at this takes time and practice.

Fast-movers can turn breaking news into stacks of cash. They can just as easily lose their shirts when the news doesn’t break their way. When you own shares in a company you will inevitably, as a part owner of the company, begin following news about them more closely. If a cargo train owned by a company that you have a stake in goes off the rails, you may feel like it’s time to dump your entire position at a loss. This could be the right play in some cases, but often it’s not.

Daily events rarely flip the fate of entire companies.

Understand your holding’s respective markets and following their performance over a long period will help you place context around such events and weigh their potential impact in the longer term. The same goes for positive news. Merger announcements, contract awards, and product launches can be exciting, market-moving events that you will be tempted to pile in on. New investors with limited resources need to be extra careful not to blow their bankroll in an emotional trade. Been there – bought the t-shirt.

Longer term, higher conviction investments will help you get over the ups and downs when starting out. This is not always the most profitable play, but it will certainly dial down the day-to-day intensity if you commit to holding a position for several years vs. several minutes.

HAVING MORE STOCKS DOESN’T MAKE YOU SAFE The age-old adage that you should ‘diversify your portfolio’ has some merits. However, diversification has many degrees – owning 25 different EV stocks far less diversified than a portfolio that holds stocks from across multiple industries. This allows you to be more insulated from a single piece of news or change in market conditions moving all of your holdings. It may be difficult to develop expertise and confidence in several diverse industries, but if you are looking for less volatility, this may be a good plan.

QUALITY OVER QUANTITY Experienced traders will tell you that buying every stock you hear about is not very efficient. Holding a hundred different stocks can make it nearly impossible to follow their performance or catalysts (especially if you have short term horizons). Personally, I like a portfolio with between five and fifteen stocks in it. You can still be as diversified as you like, but limiting your holdings will help you focus your research and keep up with things like earnings reports, market expectations, and current events that may move the stocks.

Two more terms to put of your vocabulary list. Rising share prices is not the only way for investors to see profits in the stock market. Become familiar with stocks that pay dividends to their shareholders. Some investors focus entirely on dividend stocks and treat their portfolio cash printer.

The challenge here is that the exciting, high-growth potential stocks may not pay dividends to entice investors. You may be looking at mature companies with a steady dividend and less volatility. Dividends are usually a small percentage (1%-3% is pretty standard) – and there may be tax advantages such as lower capital gains. Do some research and decide if this level of return is for you.

Now, these terms are not necessarily mutually exclusive. During a dip and recovery, even the best dividend stocks may have wild growth. Mostly we refer to long term growth opportunities and market share potential. Mature companies generally have slower growth and less upside in the stock.

BE A SHARK – DEVOUR INFORMATION

Being successful as an investor can sometimes be a case of rightplace right-time, but we think you’ll discover that it’s the people who put in the most time studying and growing their knowledge that see the best returns. Find sources that deliver reliable information and go into the depth that you need. Keep track of what these sources predict and how often they are accurate. This is vital to assessing the quality of their advice.

OTHER OPTIONS:

Stocks aren’t the only game in town. You can also look at bonds, treasury notes, crypto-currencies, and more. These are all worth knowing about and exploring and chances are, your portfolio may include several types of investments. This allows you to diversify with an eye on managing your risk level.