What is the stock market?

I'm sure you've heard of the stock market before, but maybe you don't know what it is or it seemed too complicated for you to understand. The reality is, to get a general grasp, it isn't that hard.

Essentially companies 'float' on the stock market selling shares in their companies for people to buy and sell. This means when you buy a share you essentially own a part of that company, albeit a small fraction. A share is basically a unit to show how much of a company you own, more shares equals a bigger ownership of a company.

Read more about what the stock market is here

How do stock prices change?

Companies float on the stock market to raise capital to build their business, the opportunity to increase their businesses profile and motivate staff through the introduction of share option schemes.

Many factors change the price of a stock but ultimately it's the supply and demand which changes the price. The more people there are buying it and less selling, the price goes up. The more people there are selling it and less buying, the price goes down.

Read more about forces that move stock prices here

What stocks should you buy?

When you first get on a trading platform it's easy to think, "Oh, I'm going to buy shares in Disney, Amazon, Johnson & Johnson, Tesla and Netflix", and while those companies may be great investments, there is an element of what is known as volatility. At any point, a stock price could drop and you could end up making a loss. This is the risk with investing in the stock market but when you get it right, the rewards can be great.

Until you've learnt how to analyse companies and the risks they present, you can invest in ETFs. An ETF in simple terms is a collection of securities, so more than one. For example, the Vanguard S&P 500 ETF is a stock representing the top 500 largest US companies. So when you buy a share in the Vanguard S&P 500, you essentially own a small percentage of the top 500 companies in the US.

Only invest what you can afford to lose

It goes without saying that you should only ever invest in the stock market what you're willing to lose. There is less risk with an ETF due to multiple stocks/companies being involved but it doesn't completely mitigate risk if there's a stock market crash or a recession. It is something to consider when deciding how much you invest.

The stock market is also not a place for gambling, unless you make it that way. The stock market is about making educated decisions based on factors of risk which you have analysed. If you invest without analysing, then you run the risk of losing money.

Strategy & potential from investing

Strategy

There are many strategies when it comes to trading on the stock market but with ETF's you're generally in it for the long run due to the lower chances of volatility meaning the price won't change as drastically.

You can hold the ETF stocks as long as you like depending on the level of return you want but the longer you leave them, the bigger return you should hopefully see.

Potential from investing

For example, here's the rate of return for the Vanguard S&P 500.

As you can see, it differs vastly each year due to how well each of the companies that are part of the ETF do as well as the stock market in general, among other factors. Notably 2018 was a bad year due to a number of factors including President Trumps trade war with China etc. But currently, in the last year, you would have seen a return of around 9.8% which is around the average return for the stock market on stocks with a low volatility.

What return should I expect on my money?

Well, if you invested an initial single payment of £1000 then £200 each month with an average return of 8% you would have:

10 years - £38,416 return with £25,000 total contribution - £13,416 gained
20 years - £119,193 return with £49,000 total contribution - £70,193 gained
30 years - £293,575 return with £73,000 total contribution - £220,585 gained

For those that are extremely frugal, have a steady mid-high income and have patience for their return investing £1000 each month with an average return of 8%:

30 years - £1,427,676 return with £361,000 total contribution - £1,066,676 gained

While the above last example will only be achievable by few people and probably unrealistic, there is nothing to say you couldn't get close (or invest more) depending on how much you are willing to sacrifice. No matter how much you choose to invest, any amount will be helpful in years to come.

The real point here is, with regular investing and time, your money will grow steadily. The bonus with an ETF is, you can sell your stocks and withdraw the money whenever you wish (some platforms charge fees, some don't like Trading212).

How do I get started?

There are many platforms which you can choose to invest on. A common one in the UK is Trading212, which is what I use. You can also invest directly with Vanguard. Below I'll show you how to buy shares in the Vanguard S&P 500 (you don't have to buy this stock, but it's a good way to dip your feet into the stock market in my opinion) on the Trading212 platform.

1. Go to Trading212's website
   Using the above link to sign up will get you a free share worth up to £100 with a minimum deposit of £1.
2. Sign up and create an account
   This can take a while to do as they have to verify who you are so requires details.
   Also, for ETFs you will want an 'Invest' account. A 'CFD' account is for forex, indices etc. (cryptocurrency is no longer available on Trading212 as the FCA banned it, you can still buy crypto on Gemini, Coinbase etc.). CFD has a lot more risk, make sure you research before investing.
3. Search for S&P 500
   First search for the S&P 500 by clicking on the 'Search' button at the bottom.
   

4. Click on the blue 'Buy' button

5. Select how many shares you want
You can slide the bar or enter the number of shares you want. You can choose to buy a fraction of a share, so you don't have to buy a full share. You're able to enter the number of shares you want and then add funds.

The white text (£53.399 in this case) at the top shows the price you're buying a share at and the grey text below the blue number of shares text '~£27.22' shows you the price for the number of shares you've selected.

Once you've selected how many shares you want, click on the blue 'Review Order' button.

6. Review the order
You can now review the order showing you the cost and number of shares you're getting.

7. Order has been executed
If you've successfully purchased shares it will come up with the following.

8. Now you can check your investments
In the bottom menu hit the 'pie' icon and it will show you your investments.

Below shows the value of my shares in S&P 500 ETF on Trading212 and the return I've gained so far.

Final pointers

Hopefully you have gained a better understanding of the stock market, and if you thought it was too difficult, a scam or gambling before, your mind will hopefully have been swayed to see the potential.

It goes without saying that I'm not a financial advisor so the above is only from my personal experience from reading, listening and watching about the stock market and my experience of trading. The reason I wanted to write this article was because before I jumped into the tock market I had sat on the idea of investing for years but was too scared. The reality is, you only invest as much as you want and with the knowledge I've gained I can now measure up the risk involved.

With ETFs, they are more secure than individual stocks which is why it's a good place for starting. You can choose to invest in individual companies if you wish.

The link above for Trading212 is an affiliate link which means we both get a share valued up to £100 when you deposit the minimum amount (£1) to your account. If you want to use the link, it would be much appreciated - www.trading212.com/invite/FMcBRxbw

If you want to read more about the stock market, Investopedia is a very good resource which I've used many times - https://www.investopedia.com/trading-skills-and-essentials-4689654

If you have any questions about the stock market then don't hesitate to ask and I'll help the best I can. And remember, buy low, sell high.

We all know of the evil word, 'Procrastination', and I'm sure it's not alien to most of us. Thinking to yourself, 'I'll watch this [insert tv series / film / video] for 5 minutes then go and do [this task]', which I'm sure is familiar for some of us. We put off the tasks we should do in turn for tasks which we probably don't need to do and won't benefit us in anyway. Yes, resting and enjoyment is important but we need to prioritise what we do during the day in order of importance.

How to cure procrastination

These are some of the ways or tips I've used to help me. Just like everyone else, I'm human so make mistakes or find myself procrastinating from time to time. It's important to pick up on it and act on it when you find yourself wasting time.

Do every task with intent or purpose

If we go through our day without timings in place or keeping on top of where we're meant to be or doing at a certain time it can lead us to wonder. By doing each task throughout the day with a purpose it allows us to keep a control on what we do. This doesn't mean planning your day out minute by minute but having tasks which need completed and working out a rough time we should have them complete by. This also means including rest times where we can enjoy our day while also being productive. To help with this you can adopt a time management method known as the 'Pomodoro Technique' which I'm sure you've heard of before. It is a technique used to aid with productive working periods breaking work down into intervals, traditionally 25 minute periods with a short 3-5 minute rest (for the toilet, grabbing a drink or stretching the legs - not to start a new Netflix series).

Bin the social media and remove distractions

I'm sure you find yourself sitting bored or waiting on someone or something and just naturally pulling out your phone opening Facebook or Instagram, it's a creature of habit. We can find ourselves indulged in looking at other people's lives and what they're up to for hours after we said we'd check it for five minutes. It allows us to live through other people's lives seeing what they get up to and what they, whether it damages our mental health is another question. If you find yourself pulling your phone out, put it away or else open an app which is more productive such as reading a book or planning tomorrow out or making notes on what you're thinking or a to do list. Removing distractions can help to prevent us going down the dark road of procrastinating.

If something takes 2 minutes, do it now

We put many things on our to do list thinking we'll do them later or they get added to a long list when to get them done would only take a couple of minutes. By completing tasks which would only take us a couple of minutes first, it gets us in the rhythm to continue the cycle and motivates us to keep on the correct path. Once you've done a two minute task you can tick it off your to do list making it a smaller list within a short time.

Tell yourself you'll only do it for 5 minutes

Ever found yourself saying you'll do something for 5 minutes but end up doing it for longer? Tell yourself you're going to do whatever you're procrastinating from for 5 minutes and you'll more than likely find yourself continuing past the 5 minutes. This will help to give you momentum to continue working on, the problem is starting, not continuing.

Take action

If you don't find any of the above helpful then I'm not sure what else could help even if guilt doesn't make you want to do it. Discipline is a big part to prevent procrastination and it's up to you whether you continue to procrastinate on something you've been meaning to do for a long time or you take action and get it done.

Book recommendations

Make Time: How to focus on what matters every day - become more productive using a strategy to help you focus on the tasks which you need to get complete every day

Deep Work: Rules for Focused Success in a Distracted World - if you find it hard to keep your focus and get distracted easily then it's a must read

Atomic Habits - if you want to read more about the two minute rule I mentioned above and pick up some habits which will help set you up for clearing out your to do list

You may have come across people who are frugal before, people who have a closer relationship with their food, time or money than most people. Avoiding a life of luxury and buying new phones, laptops or cars when your old one did just fine.

Frugality isn't about limiting yourself in how much fun or joy you can have in your life, it's about moderating what matters and living life to the fullest with what you have. You can live life to the fullest without a new designer handbag or a Starbucks every day.

Most of the time we want something new because we don't get the buzz from the old thing anymore because we've had it for a while but the greatest thing about frugality is that you're still in control of your life. It's about being wise, do you really need a new car or do you just want something different, to smell the scent of a new car or show off?

Being frugal is a way of life, it's something you have to adapt to and makes changes for. Be smart about the choices you make - how often you eat out, subscriptions you have but don't use or 'treating' yourself every day to trick yourself into getting something you know you shouldn't because you're trying to save money.

Here's my thoughts to help with being frugal while being happy

1. Be intentional with everything you spend

Make sure you're getting a good deal, don't go for luxury just because you have the money to do so, and don't buy it unless you really need it (not want).

2. Start a budget

Having a budget will allow you to manage your money but at the same time allow yourself a certain amount each month to spend on the things you love, it'll help you appreciate them more. There is nothing wrong with splurging every so often but make sure you save to cover it or it's an investment in yourself. Set aside a certain amount of your pay each month automatically without a second thought which goes towards saving or investments, then the rest you can spend.

3. Buy used

I'm sure it may cross your mind often about getting a new car but the reality is that the 'deals' are often not as good as they seem and as soon as you leave the dealership, it's already lost value without even putting a mile on it. Buy used and save the rest of the money. Most importantly, buy a car you can afford. Take into account the cost of fuel, insurance, taxing it and any other maintenance work which may need to be done to it.

4. Evaluate your subscriptions

Take time to go through the subscriptions you have and remove any which you don't need or use often. Help your budget by allowing yourself a certain number of subscriptions a month and limit it to that number. If you want a new subscription, you have to give up one of your current ones so you can do it.

5. Get rid of bad debt

If you have a car loan, a mortgage, personal loans or any other type of debt, focus on paying it off. The longer you keep the finance/loans, the more you're going to be paying back with interest, so it's in your best interest to pay it off as soon as you can. If you struggle with paying off loans, keep a certain amount of your pay each month aside and set up a direct debit to pay it back. Work from the smallest amount owed to the largest, known as the snowball method.

Book recommendations:

Your Money or Your Life - learn how to become conscious of the movement of your money so it provides maximum fulfilment and how money is life energy.

Rich Dad Poor Dad - learn how it's not always about how much you earn, but what you do with the money you earn which will make you rich.

The Minimalist Home - have problems thinking straight to get your life on track? Consider minimalism, with this book helping you get decluttered and to refocus on life.

For those of you productivity nerds out there who frequent Youtube, you may have come across a Youtuber by the name of Ali Abdaal. Ali is a self-confessed productivity advocate and at the same time, a waste man and grease monkey. He's a doctor living in Cambridge, who also runs his own Youtube channel with interests in five businesses.

Ali talks about the concept of door knockers and window openers which was an analogy he came across on episode of 'My First Million' podcast with Arianna Simpson

Window Openers

Window openers are the types of people who go through life looking through windows and when they find something they like, they step through and they achieve the outcome which they envisioned. The window openers see doors, but they can't see what's behind them so they pass on by them. For example, a window opener opportunity could be studying for a musical theory exam because you know when you complete it, you will have achieved it or if you get a classification in a degree, you'll be qualified for a certain job.

Door Knockers

On the other hand, door knockers are people who are the type of will knock on the door and walk through without being able to see what's behind it, or the outcome. They are risking the odds of going through the door in anticipation of something being worth their time on the other side. By going through the door, the outcome may be something unexpected or may present different opportunities compared to the window openers. An example of door knocking opportunities could be starting your own business because generally, you'll have no idea where it'll lead you.

Just because you can't see what is behind an opportunity doesn't mean it's invalid or you should ignore it. Just because you can't see the outcome of doing a certain task doesn't mean it won't have a great impact. Door Knockers are knocking on many doors with an unknown outcome which increases their chance of success because they can't see the end result and judge the opportunity based solely on it. Also, increasing the number of doors you knock will likely increase your chances of success.

Your turn

I challenge you to be a door knocker if you aren't already, even if it's for one day or even for one opportunity. Do something that you've thought about before and felt wouldn't make an impact or present an opportunity as you may never know what the end result can be if you commit to it and put in the hard work.