Guide to Investing in Stocks
Introduction
In the last 7 years I’ve been consuming plenty of content form reliable sources on how to attain financial independence. I’ve discovered that investment involves simple concepts but it is not always easy.
I’ve always been impressed by the fact that increasing your net worth will involve the following four simple steps.
- Income
- Savings
- Investment
- Simplification
In case you aren’t waiting to inherit millions from your rich parents, then you must listen to this advice to create passive income. It’s a ticket out of poverty.
Just to explain the above bullet points.
If you are starting with your pair of hands and willingness to succeed, then you need working income. Save part of this income, invest and lead a simple lifestyle.
Without income, we can’t invest. Once you’ve your regular income start saving and then investing. You may already be familiar with rags-to-riches-stories from your home area. These are people who start with a pair of hands and willingness to get rich.
At Kerosi Dotcom, we strongly believe that the best way to invest in stocks is to buy great companies and hold them for long-term.
We do not want you to develop blood pressure by constantly checking the stock market to find out whether your investment is on track.
Warren Buffet is a good example of investors who buy great companies and let them make billons for him. He is never seen checking the news to track their progress.
You need patience to grow your wealth. If you engage in buying stocks and selling them the next day, you are missing the point and of course the wealth.
Look at the leadership and the people behind the company before you invest. Great companies have great people behind them.
Understand your competence
This is an important step in starting your journey to financial freedom. Invest in industries where your competence lies. When you understand a given sector, it becomes ease for you to evaluate a number of hand-picked options.
Look for Value and Pay the Price
The great Ben Graham provides a great advice for investors and investors to be. He was a great thinker in matters investment. This means that as a great investor, go for businesses that have been undervalued. This does not imply that you go for low quality businesses. Focus on high quality at all times.
Hold onto the best businesses for decades. I promise that you will get the best outcome from this strategy.
Striking rich with stocks
Warren Buffet advises investors to scale down buying of stocks when the market is doing well and buy more when there is panic in the market place.
This advice may sound simple but it’s also difficult to comprehend. Do not be infected with the investment disease by peers. Invest only when it is the right time.
Imagine if you had invested in Safaricom shares 9 years ago when a share was trading at Ksh. 5 each. Currently, the Safaricom com share is trading at Ksh. 16. Armed with Ksh. 1 million, you would buy 200,000 shares. If you sell them now what will be your income? You will get a cool Ksh. 3.2 million. You’ll be smiling all the way to the bank! This is 220% profit on your initial investment.
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