It’s sometimes funny being a backpacker. Actually, it’s probably funny most of the time, especially in retrospect. But one thing that makes me both laugh and concerned is people’s attitudes towards the economy and the stock market. It was a surprise, then, to find one travel blogger who calls himself the “Wandering Trader” AND that Road Junky suggested that trading stocks could be a way to make money while travelling (though it is much more difficult than just opening a trading account!)
In this post I would like to share some thoughts on stock market investing. I hope by the end of the post you’ll see that despite gloom and doom news and the protests on Wall Street, with a bit study (okay, maybe a lot), you can “make money with money” (that last bit is courtesy of my Dad).
First, yes, it is a conspiracy. If you think that there aren’t a bunch of men and women on Wall Street holding meetings “in secret” or doing deals because they know the company or something, then you’ve completely underestimated all human beings. The fact is, meetings are held, deals are made and in the end big money moves the market but small money can leech off of it. You, as an individual investor, are small money. For a glimpse of Wall Street corruption check out Barry Ritholtz’s Bailout Nation about the recent crash in 2008.
Second, you can make money. And it doesn’t take much. You need $1000 to open most accounts and there are a variety of online brokers to choose from. A month teaching English in Korea or go work on a farm for a few weeks and you will be able to open an account. By opening an account you are ready to participate in helping companies build their products and offer their services. I guarantee you will be humbled (or, for those cynical folks, disgusted) with the myriad of ways to “make money with money.” Everything from your basic stocks, commodities and currencies, to options, futures, double- and triple-leveraged ETFs, bonds, and a whole bunch more. Yes, you can make money but, as with most things in life, you can also lose it.
Third, don’t trust the news. The news, it seems, is all about fear. Happy people and no guns don’t make good news, but floods, devastation, and terrorism does. Not only that, the news is typically behind and by the time it has reported what’s happened, it’s too late to plan for it. The best way to invest is to watch the news for what not to invest in. Great investors don’t like to be told what to do, they figure it out on their own. The saying “there’s no such thing as a free lunch” is perfectly apt for the markets.
Fourth, the stock market is made up of people. For all the numbers spewed out by the mass media and going up and down on those funny looking stock charts, the companies behind those numbers, and the money invested in them, at the end of the day, are the result of people. Though there are machines that can execute stock orders, no machine owns a company, no machine runs a country. But as much as the idea of “corporations as people” might irk some, it’s true. People with all of the benefits and shortcomings of being human. Don’t you think those folks on Wall Street would just love to take off on a RTW trip, too?
Fifth, knowledge is power. Made famous in the movie Wall Street, Gordon Gecko tells his young apprentice “knowledge is power.” But that maxim applies to life in general and the result is always the same: you either benefit by knowing something other people don’t or you give someone else that benefit by not knowing. Yes, markets fluctuate, you can make and lose money all the same, but you can learn to keep your losses small, when and what to buy and, most importantly, when to sell.
I hope I was able to shed some light on the markets and the fear inspired by the news. The stock market isn’t evil and surely isn’t going anywhere any time soon. Why not learn how to benefit from this financial tool instead of curse it?