How to grow wealth by using the stock market

Whether it’s building wealth or any other area in life, you have a choice. You either do it by trial and error and waste a lot of time, effort and money, or you educate yourself and save a lot of time and pain. Some people like a bit of pain to push them into action but think about it when learning to drive. You don’t take driving lessons before taking your driving test. Without any lessons, you will most likely crash at some stage. When you educate yourself, you minimise the risk of a crash and make success a lot more likely. The same goes for investing in the stock market. Most people start stock market investing without knowing the basics. They buy, hold and pray without any real rules or research of when to enter or exit an investment. They invest with no understanding of how or even where to start. I was no different. But of course, I didn’t know that. And, of course, I thought I knew better. So, I ended up £100,000 in bad debt sleeping on my brother’s floor for six months. Only instead of buying, hold and praying, I did something much worse. I defied the two golden rules of trading, which are: 1. Cut your losses short

2. Let your profits run

Instead, I decided to cut my wins short – I was so happy to make a profit I took them immediately. When I was in a losing position, I didn’t enjoy the feeling and was paralysed, hoping that it would turn around, long enough to let my losses run. So basically, I managed to do the exact opposite of what I was supposed to do. But without education, how was I supposed to know this?

Why is it that we think we can just put some money into a broker account and instantly make money? Imagine if we did that with driving. “Hey Mum & Dad, I’m sixteen today, so can I borrow your car to drive on the motorway?” It would never happen. Why do we think we can do this with our investments? Why do people go to university for 3-4 years, study to become a doctor or dentist for 5-7 years or an accountant for four years … and yet we expect to be a Stock Market wizard within days or weeks without ANY education?

There are rules to any endeavour. You need to know the rules, and you need to follow the rules. With driving, you need to understand how to accelerate, decelerate, indicate and steer, manage the gears, look in several mirrors and know the highway code and signs. I just realised how much simpler trading & investing is in comparison.

Where to invest – are you interested in stocks, precious metals, commodities or Cryptocurrencies? If stocks, which Stock are you entering and why? If Crypto, do you know enough in such an unregulated or volatile asset class? Is it on a technical basis where you like the chart pattern or a fundamental basis where you think the company has long term growth potential?

What price to get in at – I prefer buying low, so I set an order in advance and allow the price of the Stock or Crypto to fall to my entry point. Sometimes I will wait weeks, even months, for this to happen. But I wait because those are the rules.

When to exit with a profit – I know in advance when I am exiting the trade or when to exit with a small loss. But I don’t trust myself to do the right thing when the Stock is falling. That’s why I prefer entering with an automatic order below my entry point, called a ‘Stop Loss’ or ‘Limit Sell Order’ in some cases, to minimise my losses. Left to my own devices, I might very well watch the investment fall, hoping that it would turn around.

How much to invest – this is part and parcel of keeping risk low. I ensure that by the time the stock price falls to my predetermine stop loss, I will only be risking 1% of my portfolio. So, if I have £10,000 to invest, I would only risk 1% or £100 on any one trade. It’s a mathematical equation EVERYONE should know before they start trading, and very few people know this equation, and even fewer utilise it. Reward ratio generally starts with a 1:3 Risk-Reward Ratio. That means you risk 1% to make 3%. That means that for every 100 USD I’m risking, I will potentially be able to make 300 USD. That is how you trade. It is all about probabilities. And if you learn how to do this properly, you can do this all day long and the rest of your life. So that means you can, with a little bit of education, learn how to trade and invest in a very safe way. That is why education is key to growing your wealth and your personal finances.

With the investing world now taking advantage of Cryptocurrencies, education couldn’t be more important.

When you ask most beginners what they are looking to achieve, they will tell you about the profits they want to make. When you talk to any professional investor, they will tell you about the money they want to keep safe, i.e. the risk management. Keep losses small, and the wines will take care of themselves. So, if I am risking 1% of my portfolio, how much am I looking to make? Any profitable trader knows that the Risk: I have benefited greatly from Cryptocurrencies, and I have gained, in some instances, tens of thousands of percentages on some of my Crypto positions. But, I am educated, and I have been

doing this for over 21 years now. I stick to the rules I set for myself, and I do not deviate from the above key points.

What most people forget is that everything worthwhile takes a bit of time. The problem I see is most people are looking to get rich quick. I know trading and investing in the Stock Market, and now the Crypto Market, you will get “rich”, but not quick (in most cases). And do not let this Cryptocurrency hype take over you either. You will hear all the success stories, but no one is talking about the horror stories of people buying ‘Meme Coins’, like Dodge with credit cards and then when it crashes 50%, they sell and lose it all, and now in even more debt!

Trading and investing can change your life, and as for many of our clients, myself included, I can live from my trading and investing; I don’t need anything else. Now we can choose what we do with our lives, and that gives us freedom and choice. This is what financial education is all about. Learn how to grow your money, learn how to take care of your finances, and you will never need to worry about money again.

About Marcus de Maria

Renowned stock market and wealth educator, investor, and entrepreneur Marcus de Maria is the founder of Investment Mastery, one of the world’s leading investment and trading education companies.

A sought-after keynote speaker on wealth creation who has shared the stage with some of the world’s leaders in business, success and philanthropy, Marcus has gained mutual respect from many high profiled individuals including Richard Branson, Robert Kiyosaki, Tony Robbins and Brian Tracy.

Marcus is also the author of three books including The Lunchtime Trader, a guide on how to build indestructible wealth by trading stocks for just 20 minutes a day.

After experiencing financial difficulties, Marcus went from being £100,000 in bad debt and sleeping on his brother’s floor to taking control of his financial future and learning strategies to become financially fit, building multiple pillars of wealth for security. He now uses all he has learnt to help others follow this path of wealth creation.