The stock market is exciting, challenging, and lucrative; but the one thing it's not is 'forgiving'.
There are three types of stock market victims:
- Those who do time-consuming research and take a Do-It-Yourself (DIY) approach
- Those who get lucky with some stocks and become armchair 'experts'
- Those who suffer from 'analysis paralysis' and can't decide whether to enlist the services of professional portfolio advisors or act upon inside tips from armchair 'experts'
All three fail eventually. The DIY investor cannot keep up with the vastness or the volatility of the stock market and wastes time learning stock market definitions more than earning dividends. The armchair expert is an information gatherer but has no practical skills to sustainable, long-term wealth creation.
The 'analysis paralysis' man misses out on making passive, steady income and chooses to stay stagnant instead of growing richer and becomes the victim of their own behavioural biases and delay the most critical financial decisions of their life.
The stock market is exciting, challenging, and lucrative; but the one thing it's not is 'forgiving'. If you are not careful and committed, you'll be taken down by the whims of the market forces, even before you find your footing. Even people who understand stocks fail at one time or another. The Goliaths of the trading floor and professional traders have too burnt their fingers in ill-fated trades ever so often.
It's not all bad news. There are ways to bell the cat without any fatalities. Strategic and pragmatic steps. Even Buffet, Soros and Jhunjhunwala started small before making their billions off investing.
Keep it simple
For most investors, the stock exchange is a secondary or parallel source of income after their day jobs and/or businesses. Unless you're a stock junkie or have a brain like a supercomputer, you don't need to learn the overwhelming terminology, grand concepts of stock indices and share market jargon to make extra earnings on the side.
Make your money work for you. And not the other way around…that said, it wouldn't hurt to learn the basics of equity investment and grow as you go.
Don't take risks
Losing hard earned money is the primal fear of every investor. Don't bet your savings on get-rich-quick fads. Don't let stock simulators or investment apps alone decide where your money goes.
If you jump into direct stock or mutual fund investing, you're more vulnerable to risks, half-baked tips, market unpredictability and rookie mistakes.
Portfolio advisory services are your safest choice when it comes to managing money with stable, well-researched, strategically diversified ETF (Exchange Traded Fund) and stocks portfolios. They are a basket of securities (Wealth Baskets) picked and managed by a recognized advisory professional. With this approach, you invest within your risk limits and your portfolio is monitored regularly by an expert who understands stock markets. Not only do they monitor market cycles and trends rigorously, but also rebalance your portfolio proactively to manage your portfolio’s performance.
Advisory-based ETF and stocks portfolios aren't only for the uninitiated. Even seasoned traders whose day job is trading should consider investing in them as a secondary source of income.
Walk before you run
It's a myth that you must have a huge amount of money in order to invest in stocks. You can start with as little as 5-10 per cent of your salary or savings and let your advisory build up your portfolio at your own pace. You don't have to compromise on your current standard of living, you have to invest only a little every month to achieve stable wealth creation for the future.
The moral of the story is that plunging into 'self-handled' direct stock and mutual funds investing isn't the best approach for new investors. Mutual Funds may be less risky in comparison to stocks but not if you're inexperienced. ETF portfolios are the most reliable and resilient option to start with. Once you're confident and satisfied with the performance of your ETF portfolios, you can consider investing in advisory driven stock portfolios.
The author is CEO & Founder, WealthDesk.