Generating profits from an investment is a path that takes time and can be hard, but it is profitable and worth the effort. With these 5 tips to learn how to invest in the stock market, even the most novice investors will be able to start on this path successfully and without being left only in the attempt.
1. Learn to invest in the best stocks
It is important to know how to separate the wheat from the chaff. The media, and especially the Internet, are full of false investment gurus selling infallible methods for investing in the stock market and making a lot of money in a short time. Most, if not all of them, are charlatans who make a living by selling books and courses, which are useless, at exorbitant prices.
To find out who are the best, we must look at the historical performance of their investments. Warren Buffett, Peter Lynch, David Einhorn, Phillip Fisher, the managers of Bestinver. All of them have obtained great returns on their investments, making many shareholders and participants in their funds who have placed their trust in them over the long term, rich. You can earn a lot in a year if you are lucky, but an investor's worth is proven over the long term.
What do most of the best investors have in common? They all choose to invest in stocks for the long term, following the philosophy of value investing. They do not do intraday trading, analyse charts, or invest in highly leveraged derivatives. Don't be sold a false promise, because if you want to learn to invest like the best, you should focus on value investing.
2. Read a lot and read quality
Once it is clear that we are going to learn from the best, that is to say, that we are going to learn to invest according to the fundamentals of value investing, we must get down to work. The best way to do this is to read a lot. But that is not enough, and we must look for quality content. Currently, there are three main sources of content that we should not discard in order to become experts:
Books: The basic source of wisdom. I always recommend starting with Benjamin Graham's "The Intelligent Investor". This book lays the foundations of value investing, teaching us to think like an entrepreneurial investor. As the amount of investment books is enormous, I recommend you to go through my section of recommended books to learn how to invest in the stock market, which I am sure you will find very useful.
Blogs: Nowadays we are lucky to have this great free resource at our disposal. In my links section you can see some highly recommended investment blogs in Spanish.
Social networks for investors: This is a source of information that we cannot discard.
3. Be patient
Before you start, you need to know that learning to invest takes time, a lot of time. In fact, investing is an art that requires continuous learning that lasts a lifetime.
The art of investing has a learning curve very similar to that of a martial art. You can learn the basics in a short time, but it takes a lifetime to become a true master and the learning process never ends.
4. Apply the theory
Having a solid theoretical basis is a must for learning how to reverse. However, practice must not be neglected. Theoretical learning needs to be balanced with practical learning. For example, you can start by looking at the results presentations and annual accounts of some listed companies so that, over time, you get used to it and will not find it difficult to analyse the companies in depth in the future.
5. Be consistent
In learning to invest in the stock market, as with diets, physical exercise or studies, perseverance is essential. As the Roman poet Ovid said:
"The drop of water pierces the rock not by its strength, but by its constancy."
My recommendation is to establish a roadmap with concrete objectives. For example, analyse a company every month or read a book every 2 months. The important thing is that these objectives are precise, achievable and adapted to our time and knowledge.
Should I follow all this advice to learn how to invest in the stock market?
In this answer I am going to be categorical. Yes, it is essential to follow all these tips to learn how to invest in the stock market. Only skipping one of these tips can impede our main objective, that of learning how to invest in the stock market.
Why invest in stocks ?
Investing in shares is the best way to make your savings profitable in the long term. The historical performance of stocks over the past centuries far exceeds that of other financial and non-financial assets such as bonds, bills, gold and cash, as Jeremy Siegel shows in this study from his book "Stocks for the Long Run".