Investing shouldn't be scary

How to buy anything

There is a stigma with buying stocks.  People are always worried that they are not getting the best price.  However, you never see the same stigma when buying groceries for the week.  The same principles apply for both though.  $20 dollars of groceries may give you $15 dollars of satisfaction, or it may give you $40 dollars of satisfaction.

Everyday purchases

Everyone shops a little differently.  It all comes down to ranges in price and in time with some underlying quantity.  Let’s say you are shopping for broccoli; simple right.  Maybe, your price range is $1.29/lb and lower, and you are willing to buy <2lbs every other week.  Comparatively, you are probably saving more than someone who just buys willy-nilly, but you are losing out to someone paying $0.99/lb every couple of months.  This could be good enough for you. 

It gets a little more complicated with a more diverse set of ranges. For instance, you might be willing to buy one shirt for $40 dollars, 2 shirts for $20 dollars, and 3 shirts for $10. 

The players

Moreover, they can generally be categorized in a few groups: the frugal minority, the “normal”, the greater fools.  The frugal minority are the coupon clippers, who are always on the lookout for a deal. The normal crowd care enough not to buy a $10 mango, but don’t pinch every penny.  The greater fools are the people who buy whenever, and make the supermarkets rich.

Now stocks

The stock market relies on the same principles of the supermarket, but the prices are much more fluid.  For FB stock, you may have a sliding scale of price vs. quantity and some notion for how long you are willing to hold.  You might buy 10 shares at $135 with the intention to sell within a month and 20 shares at $120 to sell in a year.

The stigma

With the supermarket, the prices are less liquid, and you can justify your expenses as necessary for living.  Thus, stocks are more akin to a luxury expense with the added frustration of potential depreciation and no tangible item.  Also, your broker must find a buyer.

However, we already spend money on things that are worse investments.  People modify cars and buy fashion.  These are niche markets and are unlikely to give a return on investments.  Surely, if there is room for these in your budget, then stocks should also have a place.

Investment strategy

Treat the stock market like a department store or a supermarket.  Look for good deals and buy.  If a $10 mango is too expensive, then don’t buy.  If you think FB at $145 is too high, then don’t buy.  If you read the weekly ad from Kroger’s, then read a financial report or the news on a stock.

Outro

Stock market is a market; treat it like one.  There is nothing hard about it.  Odds are you have been operating in multiple markets already.  This one shouldn’t be any different.

Peace,

Peter