Published on October 10, 2013
Demystifying Stocks The Importance of First Trade
Initiate A New Journey • Like many first steps, the first trade on the stock market is a rite of initiation. This first step is critical in the life of the investor. • To take a leaf out of The Hero’s Journey by Joseph Campbell, this is the Crossing of the First Threshold, here the person crosses into the field of adventure, leaving the known limits of his or her world and venturing into an unknown realm where the rules and limits are not known.
Small Start, Big Day • By opening a stock market account the client has signaled that he is ready to take control of his investments, that he is ready to take responsibility and enjoy the subsequent fruits of his actions. • Respondent after respondent in the research we did exhibited very strong characteristics of this phenomenon. They all remembered their first trade, even after twenty years.
Avoid the Clutter of Advice • There are many books and a zillion articles online on how to choose your first stock. They range from the deep fundamental analysis, to a superficial one to a technical one or the good old one – stock tips. • Focusing on these strategies is missing the whole point of the activity. A plethora of choice is exactly what you don’t want as a first time investor.
Immerse Yourself • The trick is not to pick the right stock but to pick any stock you fancy – your favorite brand or your favorite CEO or your friends stock – anything will do. Take buy a small enough quantity and then start to track it. • You will look at changes in economy with a specific angle to your stock. You will read about competitor’s reactions to what your company does. The economy and market suddenly comes alive in a way that no shadow play can.
Approach Towards Investment • With a small part of your investable surplus, buy your stock, possibly even two scrips. One, a bigger firm and the other, a smaller firm. Now research the company. • Learn about the products they sell, buy them if possible. Stock market is a great learning experience. You can learn so much about the business cycles and numbers and analysis.
A Loss is Not Losing • The trick is not to just start small. Surely small is good, but critically, most of us just don’t seem to start at all. An IPO investment is as good as any launch vehicle. If you finally make a profit from your first investment you are possibly lucky. But if your first investment is a loss, then consider yourself luckier. • You learn more from your mistakes than your successes. Success tends to hide our shortcomings, but a loss will bring it out. Understanding your investments and yourself in the process will make you a winner in the long run.
Final Note • So start early, start small, start anywhere but do start. To quote a Zen master – a journey of a thousand miles begins with a single step. Please step right in.
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