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How To Start Investing In The Equity Market - Issue #2

How To Start Investing In The Equity Market - Issue #2
In last week edition, which you can read here, I have explained the main reason for investing in the stock market. Some of you might be thinking, “Yeah, that makes sense. Now, how to do that?” In this edition, I’ll detail some preparations before we jump to the ocean of investment. Let’s start!

1. Establish your goal.
Before you start and deep dive into the investing world, you should have a goal. Without it, it’s like walking without a direction and a clear path, and most likely, your investment will fail. Keep your target specific, measurable, achievable, relevant, and time-based (SMART).
For example:
  • Specific: I want to retire from a 9 to 5 job at the age of 40 and building my own lifestyle business.
  • Measurable: My investment portfolio by that time is at least $50,000.
  • Achievable: If I contribute around $570 each month, with the assumption of 15% return per annum.
  • Relevant: This is really what I want and not other people goal.
  • Time-based: I have 5 years from now.
The goal can be small or big as long as it’s SMART. Everybody is different, and it’s not a problem.
2. Prepare the budget and be consistent.
The success key to achieving your goal is the money that you contribute each month. Tracking your current monthly spending, and see how much money you can prioritise for your investment. Don’t forget to reserve a budget for an emergency fund. If the worst happens, you don’t need to break your investment plan.
3. Get to know your investment style.
There are two types of investors: the active investor and the passive investor. An active investor is someone who does the investment activity by themselves. They will research the market, analysing the stock one by one, and decide the investment by themselves. The active investing path will take a long time to observe the market. It requires more knowledge about reading the financial metrics of the company or the stock. But, this route can have potentially life-changing returns.
On the other side, there is the passive investor. They put their money and trust the investment decision to someone else, for example, the investment manager. It is a simple way to invest and doesn’t need to research the stock one by one. The return is usually predictable and moderate. Almost impossible to get a life-changing return.
For myself, I choose an active investor route because I love to research the market to find the best opportunity.
4. Open the brokerage account.
To buy stocks in the stock market, you need to open a brokerage account. Put your money there, and you can start buying and selling the stock. For myself, I invest in two markets: Indonesia stocks and US stocks.
In the Indonesian market, I use Kiwoom, and for the US market, I use Gotrade. You must research by yourself which broker works for you in your country.
What's next?
If you already establish all those steps above and set up the investment account, surely you can start investing your hard-earned money. But, always remember that investing will involve some risks and losing your money. Keep yourself educated and keep learning, even if you choose the passive investing route.
For the next week, I will explain some terms or jargons that people use in the market. See you next week!
Disclaimer: The views and opinions expressed here are solely my own, and you should not interpret them as financial advice. Every investment and trading involves risk. When making a decision, you must research it by yourself. I am not a financial advisor.
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