1. Understand Stock Investing
What is stock investing?
This question needs to be answered when investing in stocks for beginners.
My biggest mistake when playing stocks was not understanding the essence of stock investing. In my haste to jump in, to be honest I wanted to make a quick profit, I neglected to learn about the true essence of stock investing.
Instead of making a fortune, I got lost!
From there, I learned that understanding the essence of stock investing is very important for beginners. Because all strategies, how to play and other aspects of stock investing are greatly influenced by our understanding and perspective on what stock investing is.
What is the essence of stock investing?
In my opinion, buying or playing stocks is basically an investment in a business or business. It’s no different when I invest in a coffee shop or laundry joint venture with friends or close relatives.
Shares are proof of ownership of a company.
By buying shares, I mean becoming the owner (shareholder) of the company and handing over the management of the company to professional management who I believe can manage the business to increase the company’s value.
This understanding affects the way I invest. How to be calm, take it easy when stock prices plummet due to the company’s fine performance. Those who bought up shares during the market crash were because stock prices looked cheap, while the company’s performance did not deteriorate at all.
2. Peek mutual funds
If learning stocks is for beginners, one of the easiest ways to choose stocks is to take a peek at the stocks held by the Investment Manager who manages the Equity Mutual Fund.
Investment managers are required to submit a portfolio of Top 10 Shares held in Equity Mutual Funds. You can see a list of the Top 10 stocks in the Stock Mutual Fund monthly report.
On an investment manager site or an online mutual fund selling agent, you first select a stock mutual fund for which you want to see a collection of stocks.
Then, in the statistics or monthly performance section, you can see the Top 10 Holdings of stocks from the mutual fund.
Stock options for beginners can use stocks that are invested in equity funds.
3. What are blue-chip stocks?
Blue-chip stocks are stocks of the highest quality companies that are sold on the exchange. This type of stock is considered the safest and promises stability of profits.
To make it easier to imagine, look at some examples of blue-chip stocks on the Indonesia Stock Exchange, which can be stock options for beginners, namely:
Bank BCA (code BBCA) is the best bank in Indonesia with the largest ATM network, millions of customers and most importantly generating large profits for shareholders.
Unilever Indonesia (UNVR code) is the best consumer goods company in Indonesia with various brands of household products that are familiar to society. UNVR’s financial performance is one of the best on the exchange with the ability of this stock to generate profits consistently.
Bank BRI (code BBRI) is the bank with the largest profit in Indonesia. With a company age of more than 100 years, BRI Bank has the ability and experience in micro and UMKM credit, which can be said to be without competitors today because all competitors who have previously entered the micro sector and MSMEs have now retreated to acknowledge BRI’s expertise and dominance in this sector.
The three blue-chip stocks above are stock options for beginners that are worth considering if you are learning about investing in stocks for the first time.
There is no absolute definition of blue-chip stocks, but you can usually see stocks that have a large market capitalization and are busy trading every day on the exchange.
Stock options for beginners can be started with these blue-chip stocks.
4. Investment Diversification
As an investment instrument, stocks must have risks and these risks are clearly not small in stocks. The question is, how to manage risk in stock investing for beginners who are just learning to play stocks.
There is only one formula. “Don’t put all your eggs in one basket”
Very important lessons in learning stock investing.
Diversify your investment. Don’t put all your money in stocks.
With diversification, if a crisis occurs in the stock market, you can survive, not panic (this is very important) because you already have deposits in other instruments that are safe from crisis in stocks.
Financial planners mention the importance of having an Emergency Fund as a precautionary instrument, one of which, in case of economic shocks. Set aside some of your money in the Emergency Fund.
Indeed, diversification will reduce potential returns because money is placed in instruments with lower returns.
However, that is precisely the essence of diversification in that the placement of funds is divided into investments with high risk returns and low risk investments.
5. Long-term !
This is not that easy. The urge to make a quick profit, to quickly generate high returns, is always strong in stock investing. Human, isn’t it! As an investor, you definitely want the funds invested to make a profit, the sooner the better. Why is stock investment a long term investment?
I want to go back to point # 1 about the essence of stock investing, that buying stocks means I invest in a business. In my opinion, a business needs a process, it takes time, to develop, which will eventually give results to investors. Is it possible to invest in a business, we expect a profit on a daily or weekly basis? Likely not because there is a business process to go through to achieve results.
Can’t be instant in business!
It will take at least 1 year to see how the business develops and grows. As with stock investing, it takes time for your money to develop and grow in stocks.
6 Online Stock Trading, Be Careful!
For beginners who are learning stocks, the lure of quick profits, big profits in a short time is always an attraction. One of them is trading stocks.
What is stock trading?
I value stock trading if you buy and sell shares in a short timeframe, for example daily, weekly or within 1 day (‘Day Trading’).
When trading stocks, you need to learn stock trading as a beginner and pay attention to the following:
First, stock trading takes time and effort because you have to monitor trades all the time. Cannot be used or left with other jobs.
Learning stock trading for beginners, even though there have been technological advances for online trading, you must focus on trading which takes time and energy.
Unlike the normal business people who submit the company to professional management who manage and provide results after a certain period of time (1 year or 6 months), whereas in stock trading you have to monitor every day, even every minute, and expect an increase in company value in 1 day. !
Second, more importantly, stock trading expects to profit from daily stock price movements, while a business or venture (which is a reflection of stock prices) takes more than days or even months to increase the valuation of the value of the company.
It doesn’t make sense to me if we expect business value to change in a matter of days or even within 1 day (day-trading). However, this is what is expected in stock trading.
Third, the purpose of trading is market-timing which seeks to determine when the cheapest price to buy and the most expensive price to sell.
In my experience, the most difficult job in stock investing is determining when the stock price is the cheapest or the most expensive price. Why ?
Because there are so many interrelated factors that affect stock prices, for me market-timing is a very difficult job.