Investing For Kids Dummies Guide

Investing For Kids Dummies Guide 2020

Investing For Kids

Updated Feb 2023

The basic principles of Mass Psychology, Mob psychology, and contrarian investing indicate that being a lemming is extremely dangerous for your financial health. If you wish to maintain a healthy portfolio, you simply cannot afford to be a lemming; there is no other way to put it.

The masses (Lemmings) relentlessly believe that anything of value must be hard to learn or acquire; nothing could be further from the truth. One must not master intricate formulas or complex strategies to gain wealth. You do, however, need Patience and Discipline.  Patience and hard work have nothing in common; in fact, many impatient individuals are very hard-working and are forever getting destroyed when it comes to investing. On the same token, many patient individuals hardly work hard, yet they can consistently walk away with profits.

Investing For Kids Tip 2: The Next Vital Ingredient

Now that we have covered Patience, let’s deal with Discipline.  Discipline is the ability to stick to a  plan regardless of what your friends, loved ones, experts or enemies are dictating.  The only time one should think of changing the game plan is when one sees no results after utilising the program. However, if you follow the simple rules we have outlined, the odds of that coming to pass are so remote that we will not even cover it.

If you have a decent job and are willing to live 1-2 standards below your means, you can build a lovely nest much faster than you think.  And then, you can start to do things you enjoy instead of doing what you were forced to do to put food on the table.

Have a long Term Game Plan

Retirement does not mean sitting on your backside and doing nothing; it should equate to doing what you love to do as opposed to doing what you hate to do to make a living.   To do what you love doing, you need to get off the 9-5 schedule, and the only way to do that is to be in charge of your destiny.  And to be in control of your future, you need financial independence.

The first step to achieving this is to gain mastery over your emotions. You need to stop following other lemmings (the crowd).  You must be resolute in your decision and stick to the game plan. When the public panics, you should celebrate, and when they panic celebrate, you should panic.

Investing For Kids Dummies Guide Lesson 2

You need to have a game.  One needs to gain control of one’s emotions, which only comes with work. One can’t expect results overnight. Practice makes perfect,  for success won’t come overnight.

Whenever you are angry and about to make a rash decision, regardless of whether it concerns the stock markets, try to put off deciding until you have calmed down.  This is the first step in gaining control of your emotions. When your feelings do the talking, your money does the walking, and it usually walks away from you into somebody else’s pocket.  Master, this phrase;  buy when there is blood in the streets and run for your life when the lemmings are celebrating.

Knowledge is power

Educate yourself: you need to spend the time to understand the game you are playing. So make a list of what is important to you regarding investments. What do you like, High Tech stocks, food stocks, biotech stocks, health-related stocks, internet stocks, etc.?  Then spend some time finding the leaders and a few new emerging leaders. How do you do this?   You should have one of the two criteria; the first one should be high quarterly earnings or revenue growth rates.

The second criterion is that the company should have an exciting product that is not easy to duplicate. It is easier to find companies meeting the first criterion. All you need to do is go to yahoo finance and type in the symbol under the section titled Key Statistics. Here is the direct link, and for information purposes, we have selected the stock IRMD. The image below shows you how to change the symbol if you want to look up another stock.

How to Retire young and Rich

You should look for quarterly earnings growth rates or revenue rates of more than 10%.  Here is a very simple yardstick;

15%-20% = Good

25%-40% = Very good

50% plus = Excellent

However, the above process could be cumbersome unless you are already familiar with some fast-growing companies. Most individuals will need to find a good stock screener.  Finviz is a site that provides a reasonably robust stock screener, and it has both Fundamental and technical analysis screening tools built in.

Achieve financial independence & retire young

Stock Screeners can be powerful tools

There are many screens you can choose from, but the one we highlighted is the one that allows you to select EPS growth quarter over quarter, which matches the criterion we listed above. You can then take the list from this search and manually go through each of the symbols by inputting them into the key statistics page of Yahoo Finance if you want to narrow your search further.  Alternatively, you can fine-tune your criteria by selecting additional requirements.

Now that you have your list of stocks, you need patience and discipline. You wait for substantial pullbacks in the corresponding stocks before deploying new capital into them.  Regardless of what the experts state, sectors will always experience severe corrections. You need to be patient.  Once the industry corrects, you must remember the adage, “panic when the crowd is happy and jump for joy when the masses are panicking”.  The other option is waiting for the entire market to pull back firmly. Looking at any long-term chart, you will see that the markets experience at least 1-2 small to medium corrections a year; the more substantial the correction, the better the buying opportunity.

Portfolio management and stops.

You must employ stops, just in case the trade does not work. A stop helps prevent you from being blown out of the water and allows you to redeploy your capital into another strong company. Please read this section thoroughly   Portfolio Management.

Technical Analysis

While not essential, it can significantly help you in timing your entry points. Forget about trying to time the exact top or bottom. That is an exercise for fools.  Introduction to Technical Analysis will provide some ideas on where you can begin your journey if you decide to embrace the field of technical analysis.

Must ReadInvesting for Dummies: everything you wanted to know about Investing and Mass Psychology

Key factors to remember

Once armed with a list of top-notch stocks, you wait for strong market pullbacks to add to or open new positions. Looking at any long-term chart, you will see long-term no matter how strong the pullback, the market always rebounded and soared higher.

Don’t jump in as soon as the markets start to pull back. Wait for the panic levels to hit the stratosphere, and then begin opening positions in your selected stocks.  The chart below clearly illustrates that all strong pullbacks should be embraced. Market crashes are nothing but buying opportunities

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