How to start investing and gain practical knowledge ( I am done with level 1 and appearing in Level 2 in June ) ?
Go to work everyday?
Open a brokerage account and buy some stocks. There is no substitute to doing.
^thats a painful way to lose money.
best way imo. create a simulator account. many brokerages do this, and there are many free online ones.
then pick 10 companies you like. value the largest companies with the highest market cap and work your way down. until you have 10.
then do a deep dive. understand what their business is by going through 10-k and tracking them every quarter.
i started doing this on the first 6 mos after every cfa test. because the strat i was doing kept changing and i was still learning. i prolly bought my first stock after l3, when i finalized my mindset (but still changing little by little) value -> garp “agnostic”
before that. i was just doing mutual funds and etf, and getting my accounts to decent enough sizes. imo, no point in buying indivs until you got 8k for 1 trade. and even then you arent diversified at all, so you need to get your net worth to least 100k imo before you should stock pick.
People always say, go make a pretend account. However, no one cares about a fake account and you won’t be motivated to learn as much. Your first investments are going to be small anyway. If you lose a portion of that money, it won’t affect you in the long term.
My first account was at Scottrade with $10k. Of course, I was not sure if I would be successful with that. However, you have to overcome the fear of loss at some point, as this is a prerequisite to confidently following your long term strategy.
Nowadays, $10k is an unnoticeable fraction of my account, but it all started from that little investment. I would not have the confidence to take risk and believe in my investment method if I had been afraid to lose some money to learn.
I don’t believe in a simulation account either.
^ Ohai, do you like funds or is your account big enough for stocks? How often do you research stocks outside of your work?
i did a bit of both. ohai is right though. you do take real money more seriously. i actually have ~70 stocks that i track, most are overvalued so i just track their growth. i rank about 25 of them with fake money positioning and i own ~7 with real money. i obvi track the ones i own much more.
i’ve lost money in a 3k acct when i was a freshman in college. i was basically looking at the largest movers. i lost half at then before i rage quit.
i learned a bit about stocks junior year as an econ major. i chose based off regular ttm pe/div yield, whats undervalued etc. really rudimentary crap. and i learned how to price options so i started dablling with about 6k on that… i made a lot of money net maybe 3k? cant remmeber, but realized its kinda random, like i can lose a ridic amount in a short period of time, like days with big moves.
then i was into vanguard mindset cuz i just didnt want to devote too much time cuz i was a litigation consultant.
now, im pretty good at analyzing cos and tracking metrics ppl care about, combined that with tracking 13-fs (i have to do this for work) lol. and its fun to see when the ones mangers i admire purchase the shit i like. so i know how they are selecting/picking, combine that with the interviews they do here and there (something i also have to do for work), and i start to understand them very well.
U at FOFs?
nope. just peeking at what they are doing. its never a no namer though,
One thing I accepted is that I don’t know sh*t about valuing stocks individually. So, I would probably just be adding volatility with no alpha if I tried to do that. Instead, I try to focus on things I am good at, like applying leverage when it makes sense, finding cheap carry, and allocating assets from a macro perspective.
read intelligent investor
take all 5 courses: http://news.morningstar.com/classroom2/home.asp?colId=397&CN=COM
follow what ohai says
you use derivatives? I see no point atm but I will prolly use sometime if the price is right!
Thanks for your valuable suggestion 