Can investing be a hobby? Yes, investing can be a hobby. It can even be a good hobby, which in the long term will make you wealthy. Starting in this hobby of investing, there are some things you should know. I will go through some basic things to know when first starting investing as a hobby.
The purpose of this post
The purpose of this post is to go through the things you should consider when starting investing. As a hobby or not. I will be talking about longer term investing, not day trading. Day trading related posts can be found here.
Getting started
You can start your journey of investing with very little money. You can even start with no money, testing how it works with demo-accounts. Demo-accounts don’t require any deposits, but you can try how the buying and selling works.
Whether you tried with demo-accounts or not, doesn’t really matter. Start small if you have no experience. Don’t deposit all your life savings at once and buy one stock with them. You could start by investing in low-cost index funds.
Index funds are already well diversified and basically, you will own fractions of different companies. There are differences between funds as well. I have a post comparing active funds to low-cost index funds; you can read it here.
How much do you need to start investing?
You can get started with as little as 100 dollars. That amount probably won’t get you broke even if you happen to make some poor decisions on the market. On the other hand, it probably won’t make you a millionaire either, at least not for a while. I have a dedicated post about how to start investing with 100 dollars. You can read it here.
With the initial 100 dollars, you can test the waters. Probably one of the best things that can happen when you start investing, is to lose money. If the first stock you buy will skyrocket ten times overnight, that can cause you speed blindness.
Feeling like you already know what you are doing, even if your first pick was just pure luck, can make you feel unstoppable. This can be dangerous, and make you deposit bigger amounts of money and lose them.
Learn from your mistakes
With a good loss at the beginning of your journey, you realize how much there is still to learn. Learn from your mistakes, analyze the picks before you buy them and after they either rise or fall. What caused this position to grow and the other to fall?
Keep in mind that there are numerous factors that cause the market to move every day. It is close to impossible to know everything, but you can increase your odds of success with good research.
Don’t quit
Even if you happened to start your journey of investing during a bad period, when the markets are on a down trend, don’t let it demotivate you. Make an investing plan and seek opportunities. Stick to your monthly plan to invest a certain percentage of your income. Even if the markets kept falling, you would lower your average price. Investing is a marathon, not a sprint.
Historically, after downtrends of the markets, there has always been new highs as well. This is not a guarantee of future returns, but companies are supposed to make profits for their shareholders. If they fail to do so, new ones will come along and replace them.
Investing can be a lot of fun
Investing as a hobby can be a lot of fun. Doing it as a hobby doesn’t mean it can’t make you money. Investing as a hobby can be very exciting and rewarding. There are always new things to learn. New technologies and new companies are being started every year. This will provide opportunities for the future.
Investing can be a fun hobby to do with friends as well. See how your picks perform against theirs and share information about different things you have found. Internet has brought information to almost everybody’s hands. There is probably more information about investing available than you have time to consume it. Use your time wisely and invest in your future.
Final words
For me, investing is a hobby. Does it require money? Yes, most of the hobbies do. This hobby can have a positive return on investment, unlike consuming alcohol or snowboarding. Even if some manage to make a living out of snowboarding, for most of the people, the money invested in the snowboarding gear will never pay itself back moneywise.
Investing can be fun and same time make you money, without you having to do much about it. It can be a very passive hobby where you just invest monthly into index funds. Or it could be a more active hobby where you research the markets and do your own stock picks. It can be a combination of both, there is really no one way fits all, its about your personal preference.
If this ignited your interest in investing, I have a post about how investing can make you rich. You can read it here.
Hopefully this was helpful, have a nice day.
This is not investment or financial advice. Past returns are not a guarantee of future returns. Always do your research before risking your hard-earned money.