The headlines, emails, and notifications we are receiving seemingly every few minutes during this corona-virus pandemic has many of us gripped with fear of the future. I hope to share some encouragement with you in the midst of this storm on the horizon and to ensure you that this storm will pass. The news outlets and media no longer have the near monopoly status they once had, because of this they like other online and social media outlets have to drive revenue via click bait tactics. Now I am not saying this pandemic is not to be take seriously, but what I am saying is it is being made out to be something bigger than it likely is, and that is driving lots of profits to these news and media agencies. In turn we are having to filter through all the noise and notifications which turns us, like the stock market, into irrational beings.
The stock market is irrationally consistent. What I mean is the stock market over the course of many decades produces an average return of somewhere between 7-9% profit. Some years its down, most years its up, at the end of the day your average is between 7-9% that is why I call it irrationally consistent. So when it is irrational in the red and going down, this is when we as long term investors are given an amazing opportunity to stockpile highly coveted assets (Blue Chip Companies) at a huge discount some 50-70% off (even now). Companies like Lowe’s, Johnson & Johnson, 3M, and many more that have weathered many recessions and corrections and consistently rewarded shareholders with dividends and capital gains.
So that is where we are today, we have an incredible opportunity in front of us, that we can use to our advantage to fill our portfolios at an accelerated pace with shares of these companies. By doing so, we can reap the rewards of this gift of the corona-virus pandemic with an accelerated compounding effect for many decades to come. Stay encouraged, and put your money to work today, so you won’t have to work tomorrow!!
I also just dropped a video that also touches on this topic head over to my channel and check it out:
When you first consider investing into the stock market, there are so many nuances and verbiage surrounding the stock market that seems foreign. It won’t take very long once you begin your research, before you figure out there’s a lot to learn. One thing in the very beginning once you open up a retirement account like an IRA or a Taxable Brokerage account that may also be unsettling is the many different order types that there are when buying or selling stocks. In this article I try to give you some insights on what some of these order types are, and propose a way to practice using some of these without using real money, in what is called paper trading.
Let’s begin by looking at some of the most common order types:
Market Order: an order to buy or sell a Stock or ETF immediately. This type of order guarantees that the order will be executed, but does not guarantee the execution price. A market order generally will execute at or near the current bid (for a sell order) or ask (for a buy order) price. However, it is important for investors to remember that the last-traded price is not necessarily the price at which a market order will be executed.
Limit Order: an order to buy or sell a Stock or ETF at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. Example: An investor wants to purchase shares of ABC stock for no more than $10. The investor could submit a limit order for this amount and this order will only execute if the price of ABC stock is $10 or lower.
Stop Order (or Stop-loss Order): an order to buy or sell a Stock or ETF once the price of the stock reaches the specified price, known as the stop price. When the stop price is reached, a stop order becomes a market order.
So looking at these three order types is a good starting place, and most beginning investors likely will mostly use Market and Limit orders initially. Market orders work just fine on Stocks or ETFs that have a lot of liquidity (a large volume of buys and sells) meaning a market order will usually be filled very close to the current trading price of the asset. On the other hand, if you are buying a lessor known Stock or ETF that has low liquidity (a small volume of buys and sells) a market order might fill at a much higher price than the asset is currently trading so proceed with caution and keep this in mind. Limit orders are the safest way to purchase a Stock or ETF because you have full control over how long the order stays open for and the price that you desire to purchase the asset at. Limit orders also require a level of patience and may require you to close the order and reopen it at a higher price to actually get the order to fill if the Stock or ETF is going up in price so keep this in mind.
Lastly, I will briefly cover a Stop Order (or Stop-Loss Order). These types of orders are used in a defensive manner to prevent loss of capital, if one thinks there is a market crash on the horizon. Another time a Stop Order could be used is when you have held a Stock or ETF and seen substantial gains and want to lock in gains in the event of a big drop in price.
Example: you purchase stock A at $100 and after 5 years the price has risen to $250. You could set a Stop Order at maybe $225 so that is the price drops sharply you would at least keep a profit of $125 ($225 minus $100) per share.
I think this gives you a good overview of what these order types are and how to use them, now if you would like to practice using them I would suggest opening an account with a brokerage that has paper trading. A paper trading account is setup with a set amount of paper money (typically at least $100,000) that can be traded against real stock prices during the hours that stock market is open. This will give you a good opportunity to familiarize yourself with how to execute Market Orders and Limit Orders and see some results without actually using real money at first. A couple great free trading apps that have this option are Webull and Moomoo. Webull is a trading platform that has multiple account types including retirement accounts and have announced they will be rolling out options trading soon (they also announced that options trading will be free). Moomoo is a trading platform that only has taxable accounts but does already have free options trading with level 2 market data. Another great benefit to both of these trading platforms is that when you sign up for the account you get a FREE STOCK and you get another FREE STOCK when you fund your account (with $100 or more). They both are great and both have paper trading accounts!
I don’t make a lot of goals, not that I’m advocating not setting goals, but I do find it easy for me to set financial goals. One reason that may be the case is I can break out a calculator for financial planning. Also with financial planning, there really isn’t too much speculation involved once you have a budget in place. What would derail financial goals is if that budget changes, your salary gets cut or decreases, or some life event cuts into the budget. At any rate here’s to a prosperous 2020 to all of you and here are the investing goals I have created for 2020!
Main Portfolio:
$35,000 by year’s end
$123.33 monthly dividend average ($1,470 total dividends)
Roth IRA:
$9,500 by year’s end
$20.83 monthly dividend average ($250 total dividends)
Traditional IRA:
$5,500 by year’s end
$15.83 monthly dividend average ($190 total dividends)
Combined Portfolio:
$50,000 by year’s end
$160 monthly dividend average ($1,920 total dividends)
JMac Investing 