Interested in Investing? Raymond Yao's Stock Suggestions
Almost two years ago, on April 22, 2020, I opened my first brokerage and began investing in stocks. Today, I am a multi-billionaire named Elon Musk. Jokes aside, along my investment journey, I have learned some tips that may help others who are interested. Here are my top tips for upcoming teen investors:
Don’t trust a “pump-and-dump” scheme. Someone on the internet claims that a certain stock/cryptocurrency will increase by “5000%.” In reality, this is just a junk stock that only increases in value because everyone else buys it, due to the fake news. Once the stock has been “pumped” in value, the original scammer will sell their massive shares of the stock, ending with high returns while most others are left with nothing.
The Dunning-Kruger Effect. This is a psychological pattern where people with limited knowledge in a subject greatly overestimate their own knowledge in the field. When you start off, you intake all this new knowledge about stocks and go in thinking that you are the future Warren Buffet. Therefore, my recommendation is to start with paper trading, which is a resource that most brokers will offer, which allows you to trade real-time stock prices with digital money.
FOMO: Fear of Missing Out. Another trap that most beginners will fall into is seeing a stock skyrocket in popularity and impulsively buying them without any research. Just because a stock is currently rising doesn’t mean it always will.
“Don’t put all your eggs in one basket”. Back in around April when I began, I noticed how almost all airline stocks have crashed roughly 50% due to the pandemic. My inexperienced self thought that soon enough, all of them would rise back to pre-pandemic levels, and I would have doubled my money. That day, I spent all my $2000 that I started with into different airline stocks. Unfortunately, the next day, the industry suffered news that made each of them drop approximately 10%. With a balance of around $1800, I panicked and sold instantly… which leads to the next tip.
Selling. A stock is never a loss in money until the moment you sell. Undeniably, there are times when you should never hold a stock forever, mindlessly hoping that one day it will skyrocket. But on the other hand, just because your portfolio is in the negatives doesn’t mean you should instantly sell everything. You should be focused on what this stock and its company are capable of in the future…
Think Long Term. Although you may get impatient, long-term investing is the most reliable and safe method of growing an account. Although you may see those people on the internet who “Day-Trade” (people who quickly buy stocks and sell them within the same day), most of them are very experienced professionals and trade in a fluctuating market. Holding reliable stocks long-term requires less time and effort, as well as being much safer. As for which stocks you should invest in…
ETFs, Index Funds, and Personal Recommendations. An ETF (Exchange-Traded Fund) is basically a “stock” that combines most of the different stocks of a sector. Basically, it is investing in a group of companies rather than individuals. Similarly, an Index Fund follows the tracks of a diverse number of companies. These are much safer than individual stocks since there is a lower chance that all stocks in the fund would decline a lot, compared to a singular company. Finally, here are a couple of my personal recommendations for reliable long-term stocks (take this with a grain of salt): KO (Coca-cola. Pays dividends, which basically gives you a fraction of money every year or so as long as you hold the stock), AAPL (Apple), TSLA (Tesla), MSFT (Microsoft), and FB (Facebook).
As you may have read, I began my brokerage with $2000 to invest. After almost two years, I am currently at… (drumroll please…) $2460. Anyways, I hope you learned something from me, good luck with your investments!