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How To Overcome “Investing Fear” And Finally Get Started

39 | By Shah Gilani

Today, I want to tell you a story.

It’s a true story that also illustrates how the advice I often give to investors can help them reach their financial goals.

As you know, I have more than 30-years professional trading experience (I mean real big money trading). And folks often ask me, “How do I get started?”

In fact, several months ago, a young lady at the Fox studios in New York, who works there and with whom I had talked several times in the Green Room while a guest on Varney & Co., asked me that very question.

She is a person who never had an investing account and never made a trade, but because she was working at the Fox Business Network was surrounded by “the market.”

She had decided to overcome her fear about what she didn’t know and wanted to start investing in her future by learning how to invest in stocks. She wanted me to give her a stock recommendation.

But that’s not what I did…

I explained to her that for me to properly – and legally – give her one-on-one personal investment advice, I’d have to learn about her finances and her expectations and everything that’s important to know about a person before setting up a financial plan for them.

I told her she should manage her own future because she was willing to learn; and by learning she would become an expert on what was going to work for her.

Still, she was stuck on getting a stock recommendation from me to start with.

I asked her what she was interested in and what she knew about.

She said, “I’m not knowledgeable about any stocks, I don’t know about any of them.”

I told her she was thinking about stocks, and NOT to think about stocks. I asked again, “What are you interested in? She answered “fashion.”

Perfect. I asked her what designers she liked. Without missing a beat she said, “I really love Michael Kors.”

That’s all it took. I said, “Then why don’t you look at the Michael Kors company, and think about Michael Kors stock based on what you think about the company? You know the stores, you know what they sell, you know they’re popular and you know why.”

That rung a bell loud and clear. She agreed that she would love to follow the stock because she follows the company and its clothes, so she would have a great feel about how the company was doing, what direction it was going in and if they were getting more or less popular.

The next week I was back at Fox studios to guest on a segment. I ran into my friend. She excitedly told me she had opened an account at a discount broker (which I told her to choose over a big brokerage house) and bought Michael Kors stock. She bought it back in the fall of 2013 in the low $70s. KORS hit $101.04 not too long ago.

That’s how you start. You pick something you are interested in, something you like, something that you follow because you are interested in it, because you use their product, or their technology, or drive their cars. Whatever, it doesn’t matter.

The hardest place to start is always the beginning.

Lesson 1 is that every trade of course starts out as a trade. So does every investment.

It’s not complicated, so don’t overthink it. Even if you have the best intention of buying that stock that is going to be the perfect investment that makes you a billion dollars, you start out the same way every time. You buy it. THAT action is a trade. You’ve just put on a trade. If you’re lucky or smart enough, that trade will become one of your investments.

It should have a beginning and an end. It just so happens that if the end is measured in years or infinity, that trade has blossomed into an investment. That’s a great thing.

But, the reality is markets move, stocks move up and down. New technologies and paradigm shifts happen at the speed of a mouse-click. What might be a great trade that turns into a great investment doesn’t mean it will always be worth holding.

So, every beginning begins with a trade, you put on a position.

The question is, what position makes sense? What should you trade? What kind of investment keeps on appreciating and pays dividends and keeps going up?

There is no answer to that question. That is the question we all want answered.

Remember, no-one is more responsible for your money than you.

Yes, you can and often should listen to “experts” just make sure they are experts.

What’s important is what they say, the information they give you to ponder. It is an opinion, usually based on knowledge, history, analysis and it’s worth thinking about. Experts are best used as a mirror. What are they saying and what does their information mean to your thinking?

Brokers are NOT experts. They are intermediaries. Their principal job is gathering assets, not analyzing markets and picking stocks or trading.

Some brokers, and by some I mean an extraordinary few, are really good. The good ones actually “manage” money. They do their own thing. They don’t just follow what their parent company tells them to do. They don’t just shoehorn like accounts into the same tired and boring useless platforms. They do some of that, if they’re good, because they’ve set up better platforms. But those are the true money managers, not mere salesmen. If you find one of those brokers, they’re worth having. But that doesn’t mean you go blindly down their path.

It’s still your money… NOT THEIRS.

For most people, you’re better off doing it yourself.

There are plenty of resources on the Internet to do all the research you’ll ever need to do.

And there are plenty of really good investment newsletters that for a reasonable price give you trade recommendations with explanations. Still, again, it’s your money. That doesn’t mean you just follow anyone blindly. Yes, you can follow people, but never follow anybody past your own comfort level, on any trade, ever.

How do you do it yourself? You start where you are comfortable. You trade into positions you understand. If you’re following someone, including me and my investment newsletters, you can take all the recommendations if you’re given a plan to get out.

If you don’t have a plan to get out, don’t get into the trade. Or you can take the recommendations based on your comfort level.

So that’s your investing lesson for today. There will be more coming.

Of course, I’m going to continue to this Wall Street Insights and Indictments space to knock heads, call out some crooks and creeps, and tell it like it is.

But I’m also going to show you how to make big money in the markets.

Some of the lessons will teach you a little history, some will make you laugh — sometimes you’ll be laughing at me for some of the mistakes I’ve made.

But in total they will make you a better trader and investor. That I promise you.

Of course your input is incredibly useful. So please let me know what you’d like to learn about most? Just send me a message below.

Shah

39 Responses to How To Overcome “Investing Fear” And Finally Get Started

  1. Setphen Coutts says:

    Very interesting way you educate us.

    I can never exit a losing trade and find it easy to get out of a trade which is in the money and as I exit it has a further run up.

    Thanks for your advice and trades Shah.

    Stephen

  2. Alton Garber says:

    Give me the name of a good broker to do business with, how much do they charge, I know what I want to invest in, exactly as you taught the lady in the news room, but who do I use to invest what is their charge? can I take the money out of an annuity and invest it? lots of questions, my main investment is my children right now. BTW 🙂 Thanks Al

  3. Bob says:

    One of you embarrassed me by writing it takes very little time and money to set up an account. There is absolutely no excuse to not do it. Today, I set one up. Every journey begins with…

  4. Jan van de Linde says:

    I think Shah, that is very good advice. Put money into something you understand. And if you understand it only so-so, then put your money in a business with a leader you believe in.
    Good stuff. Thank you.
    Jan

  5. Duane Buckingham says:

    Shah,

    I truly enjoy what I believe to be your unbiased opinions. I have profited greatly from your advice.

    Sincere thanks,

    Duane Buckingham

  6. Lamar says:

    Hello Shah and thank you . . . I have been reading about you and subscribed to “Private Briefing” and the “Money Map Report” even though I didn’t understand much about investing . . . . but how do I find a broker and how can I learn about all the terms of investing that you talk about like stops, puts, etc. I’ve never done any investing and I am really interested but I don’t understand all the words or their definitions. I do understand business . . .

    Lamar

  7. ben thompson says:

    I became 71 a few months ago and Cndn law requires my investments to be vested ( tax protection) until cashed out for income. One area that I’ve been a little leery of but now feel confident to invest in with some oversee, is derivative mkt (puts & calls) but now find the gov’t prohibits same for vested retirement accounts. What is my best direction now,,div’s & due diligence ?? or an ETF of new techs. ?? Thanks for your advice, ben

  8. R. M. Finlayson says:

    What to look for in trends, and how to recognize it when one does see it.

    Is it likely we see another recessive trend within 6 months?

    What’s next, inflation or deflation, and for how long?

    Is silver a good buy now, and if so, why?

    I think I know nothing anymore.

  9. johnny smith says:

    yes, I did likewise 25 years ago ; I thought the product was fantastic and rode it all the way to worthless. Didn’t have a stop loss, kept thinking it’s about to recover.

  10. violeta legaspi says:

    I am a retired ER nurse.

    I started to learn how to invest in stock after I got your commercial .

    I don’t know anything about trading. I opened my first broker near my place but I left them because this they are getting irritated for my questioning about their platform.
    .
    The new broker I selected now help me and guide me how the platform works.

    I started to trade on recommended stock in small increment and get out after I got positive profit.

    Now I am used to trade your recommended stock , I am very comfortable now to do this at home.

    Thank you very much.

    Volet

  11. H. Craig Bradley says:

    IS YOUR STOCK or COMPANY KOSHER?

    I agree. Everyone needs to do only what they are currently comfortable doing. For some, its a index fund, for others a few individual stocks. Brokers will steer you to products or investments they think you are interested in be it IPO’s or interest paying investments. You have to screen them for suitability, because the broker is trying to sell product the firm has given him to peddle. That’s how it is. Brokers must not only gather assets, but they must sell product or investments the firm is sponsoring.

    As long as you weigh any and all recommendations against your own criteria and needs you are likely to make reasonably good decisions. Each of us needs to develop and refine our own investment methods and matrix. Still, advice is always helpful. Shah, here is my request for further input:

    Gazprom (OGZPY) is a major Russian Oil and Gas Company with real earnings ( per share) of $3.42. Moreover, its P/E ratio has declined to only 2.2 !! How low can you go? In spite of the obvious value, I still have some lingering doubts.

    First, the stock seems weak. Its all time peak in 2008 was $30.0/share. In 2011 when commodities peaked, it was $17/share. In 2012, $12/share was the high. In the last year or so, $10-$11/share was about all it could muster. Now, maybe only a immediate potential of $8.00-$9.00 share. Today, it is priced at $7.40/share. Its recent low of $6.46 is roughly where the stock was in Feb. 2009 at the bottom of the market after the great bear market.

    One glaring concern is their quarterly dividend appears to be irregular. In 2012 the dividend rate was about 7%, according to the wsj.com In 2014, my broker says it pays a .28 cents a share dividend or around 3.4% annual return. Evidently, they either cut or temporarily suspended the dividend since 2012. It is an unexplained detail that leads me to believe something is not quite Kosher with Gazprom. Russia is a mystery but Putin is not. Risk is higher and return appears to be lower for Russian companies. You can not tell what they will do next in Russia. Bad trade-off.

    This stock also has little momentum, in-spite of the volley of buying in recent weeks following Putin’s annexation of Crimea. Volume did pick up in the last two weeks but it looks short term. Another words, it looks to be bottoming-out but given the Spring season (warm season), with little reason for it to increase in the intermediate term. So, a good oil and gas company with good value and a real market may still not be a great investment at this time. What say you?

  12. Erwin says:

    My day is NOT COMPLETE if I hadn’t read your article! One year more to go, I know I am ready to retire early and journey in the world of Investments. Wish me success. More power also to your passion, you’re one of a kind!!!

  13. TJ says:

    I liked this article of yours. It sounded sincere.

    Thanks and I will look into investing the little money I got.

    TJ

  14. Kathleen Sauer says:

    I want to try some trading and investing, but I don’t even know where to start. I like your articles very much. Could you help me start, or just put me in the right direction?

    Thanks

    \\\\\\\\\\\\\\\\

  15. Steve Lombardi says:

    This is some of the best advice I’ve read for how to approach initial investment decisions. A young man I have been trying to get to set $1000 aside “to just start to invest”; seems to think he can’t find a thousand dollars. Everyone has at least $2,000 sitting in their garage, attics and basements. It is in the form of useless items they can sell on Craig’s List. You get paid for someone else to haul it away. Anyway I loved the article Shah.

  16. florence levkus says:

    Is it better to invest a lot of money in a few stocks or a little money in many stocks. I try to stay with the 5% rule but many times I do not even put that much money in a stock.as I am fearful that I will lose the money and do not want to lose too much.

  17. Grace Trammell says:

    Garment business and manufacturing plants and locations, and where the future lies for locations around the world where labor is inexpensive to average. Wwhere the finest fabrics come from and what designers are still making hand made garments, shoes, accessories, ect.

  18. Myles Leitch says:

    Shah
    I end up wanting to read everything you write, because you talk straight and are a good teacher. I love it, keep it coming. It’s given me hope again that I can thrive as a trader, and the reminders to ‘live well’ in addition to trading well really hit home. I’m especially appreciating the ‘downside’ trades. They are pure magic. Don’t, I repeat, PLEASE DON’T let some hedge fund hire you away from the good work you are doing for us!
    cheers
    Myles

  19. Wayne Larson says:

    I know what stock that I would like but how long do you keep one stock? do i wait until it reaches a certain amount then cash out or check quarterly?

  20. Dan David says:

    March 27, 2014

    Dear Shah,

    My name is Dan.

    I’m 75, just recently semi-retired, making about $300.00 a month, (grocery money); have $326.00 in my checking account, and have a newly established goal in life of being a writer. The book I’m working on at present is about half finished—after something like 6 years. During that time I was working 40 plus hours a week; and also working on a garden project which goes back about 25 years, the results of which I want to organize and publish before the economy completely falls apart.

    It think that the day I was born, I was dropped; fell through the cracks; was never found, and have been wondering around ever since—kind of like a ghost—with no particular direction or goal in mind, trying to figure out who I am, and how life works. I guess it was in my mid 30’s that I began to suspect, in general, that the way in which people viewed and lived their lives, and their work, was pretty irrational , and by my mid 40’s there was no longer any doubt. This from some one who is the next best thing to a recluse. Actually it’s not that I’m reclusive, it’s just that nobody ever does anything new; they could lie in bed all day and watch a video of what they did the day before, and get the same effect without going through the bother of getting up and doing it in person. It’s hard to be friends with someone when they only go through the actions of living without really being there.

    So anyway, when the housing bubble was in the process of collapsing, I looked at my finances, said, ‘Holy Shit’, and went out and bought two and a half acres, with a hundred year old house and barn for $100,000.00; put in another 25K, or so for repairs, and now have a place of my own to live and work out of.

    So now it’s 2014, and haven’t a clue as to how to handle money. What money I have, just happened to me while I wasn’t paying attention. All the information I’ve been sent by you people, written or digital, has pretty much been a case of throwing pearls to swine: I don’t speak the language.

    So far, in preparation for getting into stock trading, I called the support line of Scottrades, with questions about setting up an account, and such, and was surprised to discover that they don’t speak the language either. I talked to the lady at the bank, to see if there’s any hassle with taking a thousand or two dollars out of my savings account, and that’s AOK.

    Okay, so up to this point that’s as far as I’ve gotten; I still want to learn how to use the stock market, and all that sort of stuff, if for no other reason than to take control of my own finances—well, that is, using money map, and what ever resources come with my subscription. I made about 3 and 3/4% on my investments this year, and virtually nothing on the 40K in my savings account. Even I can see that that is unacceptable.

    In answer to your question ‘What would I most like to learn about?’, I don’t know enough about investing to even ask an intelligent question. I’m personally rather Buddhist oriented in that I have a pretty simple life style, which is ok for me, but taking into account the 6 billion people on the face of the planet all clamoring for the same resources, I don’t know what to think. Are the mega-rich living on the backs of the poor, or are they cleverly keeping the mindless masses from pillaging the planet by limiting the money that provides resource availability? With that in mind, my interests and concerns are primarily environmental in nature. (That’s kind of a pun.)

    Clean air, Fresh water, Agricultural farm land, and clean Energy sources are at the top of my list, in order of importance. I really know very little about our atmosphere other than the fact that without air, we die in a matter of just a few minutes.

    Availability of fresh water has reached critical limits all across the face of the planet. For the last month or so, I’ve been doing some water research out in the kitchen trying to establish whether a water purification product called ‘Adya Clarity’ is as good as it sounds, or just another scam. (If you come to my house when I’m not around, don’t drink any yellow water you might find setting around.)

    Water availability and Agricultural farm land go hand in hand. Whether you know it or not, all of the farm land in the United States is like 99% depleted of virtually ALL minerals, other than those artificially applied at either the beginning or end of the grow season. If artificial forms of fertilizer weren’t available—don’t even think about it. My house is located in the middle of about 500 acres of Corn/Soybean plantings, separated into two halves by a road; if a corn kernel falls outside of the fertilized area, a yellow 4 foot plant grows; 18 inches away, where the fertilizer fell, an 8 foot beautifully green and productive plant grows. However: what nobody knows, including me, until about a month ago, is that there is a big long list of Minor–Minor minerals, which the USDA doesn’t even recognize, which have been depleted from the soils ever since the ‘4o’s. What’s interesting, is that the Adya Clarity, mentioned above, is apparently loaded with those missing minerals. So anyway, this all ties in with my gardening project, and is of great interest to me, personally, and professionally. (For all practical purposes, Corporate farming practices have completely destroyed the ability to grow real crops of any kind, without massive commercial fertilizer applications.)

    Energy availability is another biggy. I have a Trane 97% efficient propane furnace to backup my pellet burner. Well, when I semi-retired, it never occurred to me that I’d be home all day, and when I cranked the thermostat up to 64, I ended up having to buy more propane—at $4.69 per gallon. I heard that there were people who had to pay up to $7.00 a gallon. So, as you can imagine, I’m a big advocate of Solar and Wind Energy; but not just because of the monetary costs: I don’t know if anyone is aware of the possible consequences of that hole that has opened up in the Antarctic, be it from CO2 emissions, or a natural occurring circumstance; I don’t know if you’ve ever looked at weather patterns as the Jet Streams shifts, and moves around, but based on what I’ve seen over just the last year, the entire United States could—just as California is experiencing right now—become another Sahara desert. The ‘Cock Brothers’ (excuse the expression) are playing with fire, messing around with their tar sands and subsequent CO2 emissions.

    Now, as we get down towards the bottom line, what I need to know is how, and what to invest in to keep the planet from falling apart; and how much do I need to invest to get started. I’m only vaguely aware of how ‘options’ work, but could use them if directed. The only web site I found that came even close to clarifying the issue, crashed three times, and then my computer crashed before I thought to bookmark the site, and I haven’t been able to find it since then. Having someone who knows everything about ‘options’ explain how they work, is about the same as trying to make sense how to write Macros, by looking up ‘How to write Macros’ when using the computer.

    And finally, I really appreciate the fact that you write what it is I that you want to get across to the person on the receiving end.

    So thanks for the invitation to write. I appreciate it.

    Dan.

  21. Russ says:

    Hi Shah
    Insight is invaluable to individuals that know how to use it. It would seem that the big issue is that education is best experienced because it sticks better if you learned through experience. There are those individuals in the industry that do want to help investors get ahead. The biggest issue with newsletters is that they are generic and no starting point for the reader. Assessment of one’s personal need takes insight that often is not done properly. That’s where the good experts you speak of step in. Newsletters give the advice of the moment. Total analysis or financial planning done properly will help anyone start and prosper. Most people on their own will incur great risk and crash. Your help is with overviews and not specific to individuals. Helpful Thanks

  22. WILLIAM L HARTLEY says:

    Having real trouble learning physically how to use my Scottrade platform to make options work. I tried the other day and made 1 contract on GOLD but after I made it I didn’t know how to follow it. It had an expiration date of April 16(?). I paniced and cancelled the transaction but was told I couldn’t do that, etc. Any books or info on line on how to relate to the options market and also was GOLD a good starter?
    I guess I need some practical guidance.
    Bill

  23. steve says:

    How do you judge what trailing stop percentage to put on a new trade? There’s always been too much of a guess factor to set it, then very often when I get stopped out the stock reverses and soars again. It’s uncanny how many times this has happened even when I set different amounts allowing wiggle room based on a stock’s recent volatility. It seems to too often do the unexpected. Is there some rule of thumb that actually WORKS better than 33% of the time?

    A second question: Do you decide ahead of time when to get out of a winning trade? (other than getting stopped out)?

  24. bland brown says:

    Need recommendation of a discount brokerage firm to open an account.
    Very much enjoy your no-nonsense approach to the market. With that said what diversification strategy would you recommend putting 100k back to work. I’m 50 and still need to grow nestegg. Rather keeping the rest of nestegg 350k in savings, should I consider EFT’s?
    Thanks for your input. Bland

  25. Robert Suttles says:

    Shah,

    I appreciate the insight and practicality you bring to your newletters. Thank you for the many good recommendations you have made in the Tech sector.

    My question is, given there seems to be a pretty strong sentiment from many quarters that a correction is due in the market between now and summer or early fall before it moves into the next strong rally, are tech stocks (ususally on the Nasdeq) somewhat insulated from the Dow and S&P 500 should that happen? If not, should we be considering paring down our tech investments until the dust settles?

  26. Alan says:

    I’ve read bits & pieces and even the whole message before, but the way you’ve stated it really captured my thinking about the subject. Even found myself taking some notes in my investing journal. I think it will help refresh and re-focus my investing behavior. Thanks.

  27. James Smith says:

    Shah
    Very well stated. As a former financial advisor, I can only say that you may have been a bit kind in your description of the big investment brokerages and brokers vs. good money managers. Brokers are salesmen, selling what their bosses tell them to sell, and carefully leaving all the risks and the crying with the clients. Brokers in most cases don’t even fully understand what they are selling, beyond the risk-free commissions which they live off. I tried it for a while, but morally and ethically couldn’t stomach it. Fortunately for me, I got out before 2008 and didn’t leave any clients wiped out, at least not on my watch. It’s your money, so be really careful who you believe and what you do with it.

  28. H. Craig Bradley says:

    DAN:

    Most people are creatures of habit. That simply means that we do the same routine and are content with that unless there is a major change, either external or internal, that forces us to modify it. Usually people are resistant of most change; people don’t really want to change or suffer any costs or risks associated with them. Therefore, we stick like glue to our respective “comfort zones” as a matter of habit and simply continue-on indefinitely until we grow old, our health slowly fails, and we eventually die.

    In a way, many people have already become rigid and closed-minded, so you could easily say they died a long time ago but remain as your so-called “ghosts”. Perhaps Zombies would be a better word ( “Walking Dead”).

    I have observed, older people (retirees) get out of touch with contemporary society and current events and live mostly in the past. Time just fades away. So, if you become invisible to most other people, that may not be a bad thing after all. In fact, becoming totally invisible to everybody and every organization would be a great asset to have in the future, I suspect, given the established trends we are locked-into as a country. At some point just acquiring more things (possessions), more material wealth, and going through more changes that someone else caused or voted for just does not have the magic we once thought it did when we were young(er).

  29. Judy says:

    I was told by one of my publications I subscribe to, to invest in municipal bonds because they pay out regular dividends every month. But another publication told me not to invest in bonds because
    the US government will be stop buying treasuries in July 2014 and interest rates will rise and bonds
    will lose their value. Can you tell me who is right?

  30. Jim Boyd says:

    Thank you Shah I am going to do my best and learn from you and hopefully I will someday be able to help someone else again Thank you Jim Boyd

  31. Bob Green says:

    I enjoyed all of the above and much of it fits me but I sure would like to hear the answers to all of the questions

  32. Pat says:

    Thank you, Shah, for your honest sharing and encouragement to learn to manage our own money.
    At first I felt embarrassed for my lack of knowledge but then quickly realized that there are a ton of people, just like me, in the same boat.

    I loved this article about how to get started. Since you have already stated that we should use a discount brokerage firm it would be helpful if you just described a few and what we need to know when selecting one. What should we be expecting to pay for a trade and how to evaluate a company before we buy –what is most important aspect to look at, etc.

    Thanks again for your help,

    Pat

  33. Paul Wilbur says:

    Shah: This week I have completed opening a margin account & have been accepted to trade options @ the opening level. I made 3 trades this week after your update early this week. I was very Thrilled with the ease of Schwab trading web page. I look forward to each of your updates & to trading the option market. Thank You for giving more of the 99%s a fighting chance in our changing world!

    Paul Wilbur

  34. June McArthur says:

    Shah, I truly enjoy reading your post you are an excellent writer. You explain your subject in detail, always including the why, how and when of every issue. I have gained great respect for your bold manner of telling it like it is. I have always liked that character in a person. It is my pleasure that I have met you through Money Map Press. Thank You! June

  35. yngso says:

    This advice is just like the advice Warren Buffet gives: Get into what you know.
    I´ll be 60 next year and feel that I´m a little old for this, having started less than 2 years ago. Also I´m too poor to do options and short selling, and I´m still building my base portfolio, spending what I don´t need to live each month. Finally my stocks are starting to give me small gains, and have a 5-10 year time horizon for when I hope/expect to see major gains.

  36. Robert in Vancouver says:

    Thanks Shah for trying to provide some basic financial education.

    There is a real and urgent need to teach people at least the basics of investing, the economy, and business.

    Unfortunately, most people don’t learn anything about these subjects in school as it is against teacher’s and union’s biases.

    So most people are easy marks for populist politicians, unions, environmental scammers, and others who take advantage of people’s ignorance about investing, the economy, and business.

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