How to Start Farming

I love going back to this essay  I wrote in my AFSCME Eng101 Free College Course Grid  Challenge last year.  Maybe Mr. B remembered this essay during the recent Robinhood App GME ruckus.  

Farming is more than the business of tilling the soil, growing crops, and raising livestock.    It also encompasses an understanding and application of business and economic concepts and the goal of farming to earn profitable returns of investments.  Farming which is investing, buying, selling, and making profits from your produce is the same as investing in the stock market.  The stock market is where you buy your seeds when you are ready to farm. Stock market indexes such as the Dow Jones Industrial Average (DJIA) or simply referred to as Dow; the NASDAQ Composite or Nasdaq; and S&P 500 Index may sound very complicated at first but so are terms like labor-intensive ventures, irrigation, fertilizers, compost, and manure.  The following steps are simple pointers to make trading stocks sound a little less daunting by equating investing to farming:

1.    Do your research  

Your friend plants the seeds on your brain when he shares to you a link to the Robinhood app early this year.  You learn, with the help of search engines, that Robinhood app is a commission-free trading app that lets investors trade stocks, options, and exchange-traded funds. You decide not to create an account on the app when you realize that you have to link your bank account to that online trading tool. You wonder if that app is just another social media platform or legitimate. You call your friend but he is ecstatic over how much his Tesla stocks have gained over the last few months. He regrets buying only five shares when the price was just over $100 last April. Today, Tesla stocks are priced at $599.04 per share. You wake up.  The first step in investing is making a plan and setting your goals.

2.     Build your investing skills with more research

You link your bank account to the Robinhood app investing account you created and you learn to call it your brokerage account. You learn the difference between stocks and stock mutual funds. You build your skills by reading every business section of digital newspapers you could access to. You read somewhere that you are making the most out of the news by capitalizing on it. You learn about choosing good stocks for beginners like you. You learn about the best stock investments. You continue with your investment education and wondering how soon you can apply those investment theories you have come up to. You are beginning to relate to economics better than you understood Econ101. The second step in investing is knowing what you are getting into.

3.     Set a budget for your stock investments

You have been buying stocks that are considered strong or moderate buys based on analyst ratings, consensus, and forecast.  Your wife does not know that you have been investing on Robinhood app and you plan to surprise her one day when you earn your first million. You bought 20 shares of NIO at $27.39 a share last October but sold 10 shares at $32 a stock when you thought that this upcoming Chinese electric vehicle   is not Tesla. You smack yourself on the head when you read that a NIO share will have a median target of $300 and high estimate of $400 in the coming months. The truth is, you are getting hooked to investing and becoming a gambler instead. The third step in investing is setting a limit as to how much you can lose.

4.     Learn from your mistakes

You stop fretting over your bullish and bearish gambits that resulted to minimal gains or losses and go back to your investment education. Being bullish is being too optimistic and overly confident and sure that the price of the stocks you bought will soar like hawks in the sky looking for their prey. Bearish in stock market terms is being pessimistic and passive like a hibernating bear. Do not be bullish one day and be bearish the next.  Diversify your portfolio and keep studying the stocks you are planning to buy. The fourth step in investing is figuring out your own trading strategies by experiential learning.

5.      Do not leave your day job

It may be too soon to think of changing careers even if you strongly believe that you have become a very successful investor.  If you are doing well in your investing, be aware that you might be paying taxes about a third of the value of your capital gains if you plan to liquidate your assets and withdraw them.  In investing, think in terms of risks rather than returns. Another key word in investing is volatility which is defined as the market’s tendency to be unpredictable. The last step in investing is to continue to investing, watching your investments grow, and appreciating the things you normally do while looking for other diversions to enjoy, like getting a life!