Investing 101: Market types and how to invest in each
So my first post about investing will be a simple one. I have to start by saying that I am still a lousy investor who just started out, and still makes countless mistakes haha. In this blog, I just want to summarize stuffs that I have learned and maybe help some of my young friends to get out of their struggle in the pursuit of "richness" hahaha.
Why investing in stocks anyways? Well, because the odds are already tilted in your favor: You have unlimited time, and your stocks can go up infinitely, provided you don't do something too stupid. Even if you do something stupid, the most you can lose is limited to all your money. What can I say? "May the odds be ever in your favor" :P
Avoid short because shorting gives you all the opposite disadvantage that I just mentioned.
There are also some truths that you can cling on:
1) Stock market beats inflation
2) In the long run, stock market grows on average 10% annually
Anyways, there is a saying, "Bulls make money, Bears make money, Pigs get slaughter." The meaning of this phase is that you can make money when market goes up. You can also make money when market goes down. Just don't get too greedy, or you will get slaughtered. The main idea is "not to get greedy." However, in this post I will explore the the idea that you can make money in any market.
1. Bull Market
This is the best market to invest in. This is when you, your friends, and everybody you meet make money in the stock market. It's simple isn't it. Stocks will just increase in price, and companies will just grow larger. Even if you invest like an idiot you still make money. The losers are the ones staying in cash.
Strategy: Just buy stocks man.
2. Bear Market
This market happens when there is an economic downturn. All the stocks are depressed, and go down in value. It is a rather depressing time for investors, but you can still make money by shorting, even though it is quite risky and not advisable. Staying in cash is a preferable. Or if you have the stomach for it, just keep holding the stocks you already own until the market swings back. It might take a while though.
Strategy: Short the stocks (not advisable, because your loss can be infinite. You also have to pay interests on margins borrowed, and time is not on your side).
Better way to deal with this market: Stay in cash if you can, and if you have extra cash lying around, buy when you determine that the market has reached the bottom or low enough point. For the stocks that you already hold, don't panic sell. Nothing good comes out of panic sell. Try to keep it in the long run.
3. Sideway Market
The market might not go down nor go up, but it might just oscillate around a flat line. Well, don't worry, you can still make short term money in this neutral market.
Strategy: Because the price will oscillate, try to buy it at the low point, sell at high and repeat. For example, a lot of people were scalping JNUG, they swore by buying it at around $16 and selling it at around $18 then repeat.
Twitter in 2016 and 2017 also oscillated around $14 to $24. You know what price to buy and what price to sell now right?
4. Conclusion
Well, with all that said, it is not a sure thing to recognize what market you are in. Timing the market is hard and doesn't work most of the time. Develop your own strategy and philosophy will take you a long way. And yeah, if you're in it for the long run, it doesn't really matter what market you are currently in.
Why investing in stocks anyways? Well, because the odds are already tilted in your favor: You have unlimited time, and your stocks can go up infinitely, provided you don't do something too stupid. Even if you do something stupid, the most you can lose is limited to all your money. What can I say? "May the odds be ever in your favor" :P
Avoid short because shorting gives you all the opposite disadvantage that I just mentioned.
There are also some truths that you can cling on:
1) Stock market beats inflation
2) In the long run, stock market grows on average 10% annually
Anyways, there is a saying, "Bulls make money, Bears make money, Pigs get slaughter." The meaning of this phase is that you can make money when market goes up. You can also make money when market goes down. Just don't get too greedy, or you will get slaughtered. The main idea is "not to get greedy." However, in this post I will explore the the idea that you can make money in any market.
1. Bull Market
This is the best market to invest in. This is when you, your friends, and everybody you meet make money in the stock market. It's simple isn't it. Stocks will just increase in price, and companies will just grow larger. Even if you invest like an idiot you still make money. The losers are the ones staying in cash.
Strategy: Just buy stocks man.
2. Bear Market
This market happens when there is an economic downturn. All the stocks are depressed, and go down in value. It is a rather depressing time for investors, but you can still make money by shorting, even though it is quite risky and not advisable. Staying in cash is a preferable. Or if you have the stomach for it, just keep holding the stocks you already own until the market swings back. It might take a while though.
Strategy: Short the stocks (not advisable, because your loss can be infinite. You also have to pay interests on margins borrowed, and time is not on your side).
Better way to deal with this market: Stay in cash if you can, and if you have extra cash lying around, buy when you determine that the market has reached the bottom or low enough point. For the stocks that you already hold, don't panic sell. Nothing good comes out of panic sell. Try to keep it in the long run.
3. Sideway Market
The market might not go down nor go up, but it might just oscillate around a flat line. Well, don't worry, you can still make short term money in this neutral market.
Strategy: Because the price will oscillate, try to buy it at the low point, sell at high and repeat. For example, a lot of people were scalping JNUG, they swore by buying it at around $16 and selling it at around $18 then repeat.
Twitter in 2016 and 2017 also oscillated around $14 to $24. You know what price to buy and what price to sell now right?
4. Conclusion
Well, with all that said, it is not a sure thing to recognize what market you are in. Timing the market is hard and doesn't work most of the time. Develop your own strategy and philosophy will take you a long way. And yeah, if you're in it for the long run, it doesn't really matter what market you are currently in.
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