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Investing: Walking, Driving & The GPS

It’s funny how the title might sound weird. What has investing got to do with walking and driving? Yes, sure there might be risks involved… But let’s imagine this… We are on a journey towards our destination called, “Financial Freedom” and we are all journeying on this particular road, which is the path that we are going to take to get there!

1) Walking

Some of us choose to walk. Sure, walking is slow but it is pretty nice, easy and safe. Everyone can walk. Now, buying and holding index funds, for example, SPY and stocks of great businesses is like walking. It’s pretty easy to just buy, dollar-cost average and hold. You hold them for the long term – 10, 20 or even 30 years! The journey can feel slow, long and a bit dry but you will eventually get to your destination. The risks involved will potentially be low especially when you are diversified in a good index fund or buying into profitable great businesses, for the long term. You may even learn how to “walk” better or faster and further lowering the risks by learning how to spot great businesses at undervalued prices.

2) Driving

Some others may choose to drive instead. Driving is a lot faster than walking. It helps to shorten the time taken to reach your destination. However, driving comes with potential risks and not everyone knows how to drive. Using derivatives and leverage, for example, Options, is like driving. They help to boost your profits and potentially shorten your journey. But the flipside is also true – they come with potential risks. Not everyone knows how to make use of derivatives and leverage properly. Which is why, like driving, everyone should learn before trying them out! The right knowledge and lots of practice definitely help to lower the risks.

3) A GPS System

Finally, adding that GPS system will help you navigate some parts of that winding road, similar to the short term fluctuations in the stock market, just in case you might get lost. Not everyone needs a GPS system. You won’t need one if you are not too concerned about any short term fluctuations. But for those who do, learning some technical analysis or even how to trade, will definitely help you to navigate the stock market better.

In conclusion, only YOU can decide whether or not you want to embark on the journey of investing, towards financial freedom, in the first place. And it is also your choice if you choose to either walk or drive. Both are fine, some are more comfortable with walking and do not mind taking more time, while others may choose to drive. As long as you can stick with it, you are good to go. However, one should first know how to walk first before learning how to drive!

Walk/drive safe! 😊

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