Just as I was once a newbie with investing/trading Cryptocurrencies and stocks, I'm sure every day someone enters the space with no idea of what and how things work. Even someone with some experience can still find knowledge from others to be useful. Knowledge is key. Firstly, I would not classify myself a brilliant investor or trader and as it is always reiterated in the Crypto/Stocks space... DYOR (Do your own research) and you will see that acronym used a lot all over the place. But, I will try and drop gems on what I found to be useful and things that everyone can benefit from.
A cryptocurrency is a digital currency used as a form of payment to exchange for goods and services. They work by using an online ledger to record transactions in a secure manner. There are many cryptocurrencies around and roughly 6700 traded publicly and at the moment, the total value of Cryptocurrencies is valued at $1 trillion. I'm sure most people are now familiar with Bitcoin, which has a market cap as of today of around $940 billion. A market cap for a Crypto is defined as the current price of the digital asset multiplied by the coins in circulation.
What about Stocks? A stock is ownership of a fraction or share of a company and there are many many books out there to help you on your investing in stocks journey. One of my favourite books I would always recommend to new investors is ''The Intelligent Investor' by Benjamin Graham (shown below). It is a brilliant eye opener into the mistakes we make as investors and the aspects through history which create patterns for investors to inspect and use to take advantage of the market.
But why invest in stocks? Let us not beat around the bush. For profit. Profit. Ownership of a company which can lead to having a say in business decision which you can benefit from. Dividends, which is where a company returns money to the shareholders. Essentially, you have to understand the funds you have invested in a stock are working for you 24/7. Of course, you may have red days when you are not in profit and you will have green days - but ask yourself, what will you get when you leave your capital in the bank. Leaving your funds in a bank savings account and accumulating small gains at 1-1.5% each year is nothing compared to the opportunities available to you when you look at stocks and cryptocurrencies. You also have ETFs (exchange trade fund) is a type of investment fund created and traded on an exchange. Here you are investing in a number of stocks compared to you choosing the stocks individually. The advantage of this is the stability of returns that you can get from certain ETFs which can nearly guarantee you a return of 8-14% per year. A great example of this is the Vanguard S&P 500 ETF (VOO) which has some great returns for new and experienced investors.
Have a look at the S&P 500 historical returns - https://www.slickcharts.com/sp500/returns
So how can you tie this all in! Firstly, remember your situation is specific to you. You have to evaluate your own risk and make decisions to benefit yourself. The risk can be huge with both cryptocurrencies and stocks and IMO the risk is bigger with cryptocurrencies if you have less experience. However, if you have some understanding of understanding market cycles, supply and demand, trading patterns, bullish and bearish signals and understanding of fundamental and technical analysis can duly benefit your approach to cryptocurrencies. Whereas, with stocks you can sit back and invest in an ETF or reliable stocks like the larger market cap stocks and see great returns over a long period of time. You can look at high paying stable companies that pay great consistent dividends and benefit in this way. On the other hand, you can invest in a more aggressive manner with focus on growth stocks (a growth stock is a stock which is anticipated to grow at a significant rate in the shorter term).
What about if the the investment in the growth stock is risky and you don't want to splash all your money in a few growth stocks? Diversification! Diversifying a portfolio and your holding can be a vital aspect to how you aggressive or safe you would like to take on your investments. Some people would want to play safer and go 30% in growth stocks , 10% in dividend paying companies and 60% in ETFs. More aggressive investors could be looking at 70% growth stocks, 20% in dividend companies and 10% in ETFs. It is your own preference! I believe what people find it hard to understand is the risk is something you need to control and recalculate every so often and this is where you can find yourself learning and understanding more about the market and what you own.
Example of how to Diversify by Dave Ramsey - (Link for full article at the bottom)
What about time? Do you have time to invest and keep up with investing in 10 companies and familiarise yourself with business announcements or earnings? Again. You are in control of your own time and decisions. If your answer was no, I would suggest to look at less companies or even focus more on ETFs. This allows you to invest in a larger number of companies and rely more on the overall outcome of a sum of stocks instead of you choosing them yourself. Some of my favourite stock people on Twitter are @LukeDonay, @DecadeInvestor, @TheStackMarket, @TheeFinanceGuy, @Dividend_Dollar, @Business_famous, @The_SmartMoney and many many more who I have come across but I'm sure you will come across.
Now for some Cryptocurrency advice! It is risky. It can leave you with great returns. It can leave you asking yourself why did I buy this coin and not the other one or why did I sell now and not later. It requires patience and understanding of the token you are holding, the company who have developed the token and the fundamental and technical analysis behind all this. You also have to expect the unexpected as market changes are rapid and unlike stocks which are Monday to Friday, Cryptos are 24/7! You can also use that to your advantage. Don't be fooled by Crypto pump and dump groups, they might not always work and you can lose a ton of money! Don't get too swayed on Twitter or other forms of Social media, there are many who will push what they are invested in down your throat and you can easily follow the herd. At the same time, you can find some great investors in Crypto on Twitter and YouTube. Some of my favourites are @ben_garvis, @MartiniGuyYT, @CredibleCrypto, @CryptoNewton on twitter.
Don't place all your investment in one Crypto! Diversify. Understand how market cycles work and when the market is in a bull market and a bear market. Find great projects and have patience and invest in the future! Keep your coins safe! Research the projects and the CEOs and the direction of the company. Know that just because a company has great fundamentals doesn't always mean the coin will make you profits and know that a coin with not much utility can make you a lot of profits. Lets take Bitcoin for instance, a coin that for me will be a store of value (like Gold) has risen a huge amount but it doesn't have fast transactions, the fees are somewhat high but the coin is the face of Crypto so it has benefitted.
Where can I start?
Firstly, to invest in stocks you want to understand and find your method of choice. Understand your risk and execute. For stocks, it is quite dependent on where you live, your preference for usability of the platform and the benefits and disadvantages of each. A few that spring to mind -
Freetrade - a great new company from the UK with a sleek and easy to use application both on Android and iOS. It doesn't have the same number of stocks as other well known platforms like Trading 212, Robinhood or H&L but it does offer most of the well known ones. It offers a plus scheme for more saving, pension features and an ISA account feature. Fractional shares are also offered so maybe you don't cant afford to buy 1 whole Amazon share or you'd prefer to diversify your money across different companies - well Freetrade lets to buy a fraction of a share! That is a brilliant feature to allow comfort for users.
Acorns - spare coins? dont know how to save when you are a student? spending too much on little things? Acorns is a great sleek designed application with several helpful features for beginners and can start you off to a great journey. It also offers a vast amount of knowledge with well written articles in terms of saving, investing, buying homes, inflation and much much more!
Robinhood - controversial? a little but lets not take away the fact that Robinhood has come along way and does great to offer minimal fees and an easy to use application. Things are made simple with Robinhood with even knowledge journeys offered for beginners! Fractional shares are also offered here! Although, I am from the UK and this is a US application, I have been able to review the application. Offers crypto but I would personally avoid places like Robinhood and Paypal to buy Crypto, they know that people might want to purchase some but there are better fees elsewhere!
Trading 212 - Trading 212 is an easy to use application with a lot of feature and a lot of stocks offered. The pie chart feature is a great way to follow successful investors and invest in their choices for stocks. I do feel sometimes things move a little slow with Trading 212 but they do work well and keep you updated on changes and email you with your purchases and balance. You can invest a certain amount directly from Apple Pay and that is a great feature but there is a limit!
There are a lot more which I have come across and some which I haven't really used so I cant give my opinion about them but ones that I have come across many times that people could check out are AJ Bell and H&L.
As for where to buy Crypto, we have many many apps and we will continue to see the volume increase! Brilliant news. I have actually used many and I have a good experience with several and as many would know there are numerous coins where only one or two platforms offer the coin.
As a beginner it is easy to go with Coinbase as this I feel is the most well known for beginners, but after using the platform I have found the offering of Cryptos are really limited and the fees are not so great. The design is brilliant and the Coinbase Wallet is a great add on to connect to and hold your coins but again, there are many wallets out there that offer different levels of security for your own preference.
My favourite three are Bitrue, Kraken and Binance - the fees are great, there are choices available for you to trade, invest, stake and lend coins. The three are similar in layout but Kraken is slightly less user friendly for myself. Although, after a few purchases, you will get used to the platforms. One tip to see what platform offers the coin you want is to use Coingecko and on the platform you can find a great summary the coin including market cap, volume, chart information etc.
I hope you can find some insight into what investing can demand from you, with it not just being your money but also your time and ability to understand and execute. You will get used to things overtime and learn great lessons along the way. You will lose money and you will hopefully make more money but always reflect and understand why things happen. Good luck to all and feel free to ask any questions. I am also a learner so feel free to share helpful links or resources that I might be able to benefit from!
