Investing tips for indie hackers - everything you need to know

Whether you’re a beginner investor or an experienced one, I’d like to share a few tips from my past 10 years of investing in the stock market.

I’ve had my fair share of losses and victories, so hopefully many of you can learn from my mistakes and gain some valuable insights on what it takes to be a successful investor.

Long-Term View: What We Can Learn From History

Human beings tend to have a very short-sighted view. We gain gratification from instant pleasure like a Snicker’s bar, but we gasp when we have to work out every day for 3 months to reach our ideal body type.

The stock market is no different: it’s an excellent mechanism that penalizes those who are impatient, and rewards those who hold long term. If history has told us anything, it’s that consistency and patience often wins.

In fact, there’s a statistic that those who hold their positions for over 5 years have a 90% chance of being profitable. Think about that for a second.

Over the long term, the market goes up long term due to inflation, population growth, and the production of innovative goods and services from businesses. Those who hold long term are often rewarded for their efforts by riding this trajectory.

Stock Selection and Asset Allocation: Growth vs. Value

Buy and hold long term is often a great strategy, but what stocks should we buy and hold? And how much of each stock should we buy? These two questions are the fundamental questions that every investor has to face: stock selection and asset allocation.

Stock Selection

There are two types of stocks: growth stocks and value stocks. Growth stocks are investments that you expect to be growing fast year after year, while value stocks are priced cheaply for the value.

When evaluating growth stocks, you want to find stocks that have strong quarterly annual percentage gains in revenue and net income. Many of these stocks also happen to be in the technology sector such as FAANG.

For value stocks, you want to look at the P/E ratio and EV/EBITDA, which is essentially a ratio of the price or enterprise value of a stock divided by their earnings.

Buying growth stocks with upward trend in growth rates > 20% for revenue and/or net income and investing in value stocks with a lower P/E ratio and EV/EBITDA are strategies to reap long term gains.

Asset Allocation

Diversification is often the motto of Wall Street to hedge our risks in case of an economic recession. Holding too much of one stock can be risky, but too much diversification also dampens our gains. An ideal number of stocks to hold is somewhere between 8-25, with the lower end being a more concentrated portfolio and the upper end going for more diversification.

The conversations around stock selection, asset allocation, and even esoteric options strategies can be endless. Investing has always been a hot topic within conversations of friends and social circles. But rarely do we get to really see what everyone is trading in their personal portfolios.

That’s why I decided to build Wealthly, where users with connected accounts over $1,000 can follow others’ verified trades in complete transparency. You can also view all of your investments in one place, and we currently support Robinhood, Fidelity, Schwab, Coinbase, TD Ameritrade, and Tastyworks.

Now, I could see everyone’s trades - the winners, the losers, the hopes and dreams. And we’ve created a community where users can share their investment knowledge as well.

As I always say, we like to put our money where our mouth is.

Learn from your Community

What products are getting released? How many iPhones will Apple sell this year? One of the primary reasons why I built Wealthly is so that retail investors like us could have these discussions on how to reach financial freedom through our investments.

By studying the stock valuations and the drivers of revenue and growth such as new product lines, new technology, investment in capital infrastructure, and change in management teams are all important conversations to have. In addition, macroeconomic factors such as news reports, Fed announcements, and interest rate hikes can also be meaningful insights for an investor to learn.

Community discussions are helpful to inform investing strategies. The stock market is by nature a voting machine, so seeing with full transparency what everyone else is investing in can provide much more value than what anyone else can possibly advise over a dinner table conversation.

Key Takeaways

• Hold your positions for the long term. Investors who hold their positions for 5 years or more have a 90% chance of being profitable.
• Evaluate the fundamentals of the stock such as revenue and net income growth for growth stocks and P/E and EV/EBITDA for value stocks.
• Leverage your community of investors and always be learning

Investing requires patience, due diligence, and strategy. By building Wealthly, I hope I can empower retail investors to not only have fruitful discussions about their investing, but also gain full visibility of each other’s trades to ultimately achieve financial freedom.