• Chinmay Varshneya

My Journey in Investing: Introduction

Insert motivational investing quote here.
Warren Buffet
My untouched fund!

This summer, I began investing in the stock market through a custodial account. My dad financed me a $5,000 fund with the caveat that 10% of the net profits (or losses) would be reflected in my bank account. The idea was to introduce me to the stock market in a relatively risk-free manner. While in a more professional setting, a $5,000 fund is the equivalent of small change, for my purposes, this is more than enough to develop a reasonably sized portfolio.

The purpose of this and my next series of posts is to detail my experience, personal growth, and findings in the stock market. Hopefully, I can reflect on this at a later time and see my progression from initially investing out of a place of inexperience. My journey as an amateur will hopefully flesh-out, and by the end of this 2-year journey, I hope to- 1. Make a profit (as a matter of course), but more importantly, 2. approach the market with a sense of greater understanding. I hope that I can gain some original yet valid insight with regards to finance. Later this insight can also help me in another project in which I aim to educate others in diversifying their portfolio to better financial literacy. As revealed later, this experience can also aid me in understanding how politics influence the US Market. (i.e turbulent US-China trade relations affecting American business)

It is important to preface my experience in entering this investing exercise. My knowledge, as of now, is from two main sources. Over the past summer, I took an introductory business course from my local community college. While it didn’t go too in-depth regarding finance or economics, it did provide a strong foundation. Through most of the course, I explored material related to sales, marketing, and various consumer practices. This allows me to understand how well a company or brand can sell their product with regards to the niche they are in. Additionally, we covered the basics of accounting and fiscal policy. As a result, I can slowly begin to navigate a companies financials and its relationship with the Federal Bureau (through its cutting or raising of interest rates). Furthermore, I am now familiarized with general business jargon, which is where most of the value of the course comes from.

Additionally, I attended a two-week business program over the summer at UC Berekely, arranged by the Haas. It was mostly an entrepreneurship course, but in learning about the basics of entrepreneurship, I picked up information about the inside workings of companies in general. Understanding a company’s Corporate Social Responsibility plan, Target Market, and Value Proposition all seem to be important factors when looking where to invest. After all, for better or worse, the public opinion of a company can readily sway its evaluation. In fact, even the threat of what one considers bad press (i.e., Elon Musk smoking marijuana on the Joe Rogan Podcast) can have significant short-term repercussions. A more tangible skill I took with me from the program is the ability to examine a public company’s SEC filings. Simply learning how to access the filings on the website allows you access to a couple of useful company metrics like their bottom line, which hints at their fiscal growth over time. After all, If the numbers look good, then investing may be a good idea. However, it is also important not to get too caught up on single data points. While figures like a company’s yearly profit margins may look important, one must also understand the bigger picture. This is again exemplified by companies like Uber and Tesla, who have made yearly “losses” in light of the possibility of massive future growth.

A Snip of Tesla’s Quarterly Balance Sheet

A little background: The idea of investing first formed in my head perhaps two years ago, when I watched an interview with a hedge fund manager on Youtube. I was captivated by the seemingly ever-rewarding lifestyle of portfolio development. At that time, I began playing around with various stock market simulators on the app store but got frustrated with the rather superficial nature of the user interface. Many of them provided little virtual capital, relying on you to pay real money to get a substantial amount of “fake” money to invest in the app. Therefore, I moved on in my sophomore year and began working on a paper portfolio. It felt a little more hands-on from my end, even though it was again a no-risk system. After a couple of months, working on the paper portfolio gave me the confidence to begin putting my own money into the stock market.

Paralleling this, in the middle of 2018, I got a student subscription to The Wall Street Journal. I started reading their business/ finance articles and also incorporated their Daily “10-Point” into my morning ritual. Reading the briefing takes me only twenty minutes, but it gives me a good run down about anything “important” I missed yesterday. Fortunately, due to the nature of the journal, the updates also provide information regarding how each of the changes will affect specific companies that their audience may have vested interests in. Therefore, after a couple of months, I found that it, of course, helped me stay well-read regarding current events, but it also lead to me building connections between the market and the news surrounding it.

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