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Let's say you've decided you want to choose stocks yourself. Great but where do you begin?
In our humble opinion this is a foundation of a great investment. Strong cash flows, low debt to cash flow ratio, selling at a discount to asset value and with a strong brand or physical prescense that is well defended. Warren Buffet calls this a moat. You want this to be long and deep and wide and with angry gators inside it. (Barriers to entry)
From there stick to industries you know and only invest what you can avoid touching for at least 3 years.
Other things to keep in mind, the free cash flow multiple and price to earnings multiples should be considered. Additionally pay attention to revenue and profit growth some stocks can look expensive but really be cheap.
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What are my investment options beyond stocks?
Other than stocks you have options, bonds, futures and real estate.
We will give you’re a overview of these here and go into each in more detail in future articles.
Options are a contract on a set number of shares of stock. Say a lot of 100. These contracts mainly give you two options bet on a stock to go up or down. You buy a call when you think the stock will go up and a put when you expect it to go down.
Futures are a contract betting on the price increase of a commodity, say you think oil will go up five dollars or gold will go up fifty dollars. You but a contract on this price increase as long your right you make money.
Bonds are the debt of a company, depending on the company’s financials and credit rating you will get more or less interest. A bond rated below B grade is considered a junk bond because the chances are you will never get your money back.
Real estate is buying a physical or digital property. Physical property is a house, apartment building or some commercial location. Digital real estate is buying domain’s or website and flipping them for a profit.
This should give you a better idea now of what your investment options are.
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The Basics Of Investing In The Stock Market
You have a little money, you keep some in a jar, maybe you want to add more to the jar one day. That’s where we come in. ( Yes I am quoting the Wedding Singer) Love that movie. At Broth Investing we believe knowing how to be smart with money can be life changing. We became financial experts with a lot of blood, sweat and tears, It’s our superpower and we want to share it with you.
How to get started investing in the stock market.
Buy a small cap or mid cap index fund, learn how to analyze individual companies, pray and just chuck money at something.
These are your three main options. For most people buying an index fund with a low-cost structure is enough. You want this to always be less than .5% . If you want to learn how to analyze companies and build your portfolio we will teach you in future articles.
In the meantime, your like small cap, midcap are these types of mushrooms? I’m too sober for this please explain.
A small cap is a company worth between 50 million and 1 billion, these companies have a bit more risk but offer higher investment rewards.
A mid cap is a company with a value of over 1 billion but less than 30 billion, anything above that is a large cap and your investment returns could be more modest.
We don’t think blindly chucking money at something without researching it is a good idea so option 3 is not something we would recommend.
In our next article we will start to teach you how to analyze companies for investment and how to build your financial future.
We will also talk about other investment vehicles beyond stocks but one thing at a time.