Investing can be as easy or difficult as you’re willing to make it. There’s all the information you will ever need online, for free, but it’s how you go about interpreting and making use of it. Since the start of the pandemic, trading volume from retail investors has skyrocketed – as has new broker signups.
New investors are constantly making mistakes because investing can be made as easy or hard as we want to make it – with many choosing the latter. So, before jumping into advanced charting strategies, let’s take a look at 5 basic ways we can improve our investments.
Choosing the right broker
It may seem like “what assets should I invest in?” is the most pressing issue, but first, you will need a broker to facilitate any investments you make – and this can make a big impact! For example, forex brokers differ in a variety of ways, such as:
- Who they’re regulated by
- Minimum deposit
- Markets supported
- Charting capabilities
- Research information
- Speed of transactions
- Costs and fees
- Algorithmic and programmable potential
These are just some of the ways forex brokers differ, so be sure to pick the one that is right for you. It’s important to have a few requirements and priorities in mind. For example, what methods of investing are you going to be doing?
If you’re day trading, then charting and low margins/costs are going to be very important, as well as functionality such as stop losses. Here is a list of forex brokers on Topbrokers.com, where you can find brokers with reviews for you to compare.
Don’t overweight with cryptocurrency
Cryptocurrency shouldn’t be ignored, it has seen profound growth, as well as becoming increasingly influential when it comes to being commercially and politically legitimized. Now, what we shouldn’t forget is that it’s not as unique as many people would like to believe from an investment standpoint.
Whilst blockchain technology certain is unique, it’s difficult to evaluate its value.
So, we should keep in mind the basic rules of thumb, like not letting past performance lead us to believe it’s a reflection of what is to come! With high growth comes high volatility, and it’s common for crypto investors to downplay this long-term risk.
So, investing in crypto is far from a poor investment decision, but don’t allocate more than 5% (some would argue 10%) of your portfolio to it, as this can quite easily be deemed as reckless gambling. If you want to succeed in the long run, don’t neglect the investment theories and rules that have stood the test of time.
ESG can be a great way to help the environment
Who said profits and saving the world have to be mutually exclusive? Thanks to ESG funds (Environmental, social, governance), we can invest ethically by avoiding oil, fossil fuels, and firearms, and instead focus on solar, batteries, and socially beneficial equities. There used to be a notion that ESG investing may be a slight compromise over simply being more open to more investments in your portfolio, but this idea is slowly dying out.
That’s because ESG investing is getting vast amounts of mainstream attention, which further improves the prospects regarding growth investment. Of course, political policy is expected to force us (and businesses) to take climate matters more seriously sooner or later, which may signal a greater shift towards ESG. Also, it’s just the right thing to do for many people and is tipped to perform well in the long term.
We often hear people say they’re holding out on buying a home because they believe there’s a crash coming up, and they’ll pick a house up much cheaper. Many also apply this to commodity prices and equities. The truth is that evidence doesn’t support buy-the-dip investing. Whilst it’s true that timing a dip perfectly will result in maximum gains, most people cannot time a dip well.
This is where the concept of opportunity cost comes in. Many buy-the-dip investors think they’re immune to the crash because they’re not yet in the market, so they can’t lose out (and when the crash comes, it’s their time to shine), but the reality is they are losing out each day that goes by with no crash. Why?
Because markets tend to grow on more days than they shrink, and they tend to be up in the long run. So, how can we avoid putting our savings into a market that is feared to perhaps crash? If you insist, dollar-cost averaging is a highly powerful investing method, in which the investors buys a consistent amount periodically and indefinitely. The beauty of DCA is that you spread your risk.
If there’s a crash, your weekly/monthly payments are continually buying the asset but now at a cheap price. In this sense, some DCA investors do not care in the slightest if there will be a crash because it only serves as an opportunity. But remember, don’t alter the amounts – the idea is to surrender to speculation and enjoy long-term growth.
Never panic sell
If you’re investing for long-term growth, it’s important to stick to the strategy. Stick to any strategy, in fact. Panic selling is the number one threat to investors because it taps into emotion and irrationality. Whilst this doesn’t apply to day trading, where stop losses are important, investing in the average market returns means getting the average market returns – these averages are calculated over decades.
So, if your investing time horizon is a decade or more, a crash is far less of a threat than you believe it to be in the temporary midst of one. As for day trading dips, it’s important to have a strategy in how to deal with any situation. It’s not panic selling if you have planned this possibility in your strategy and as a means to limit losses
. Again, trading in this way can mean some days are accepted as losses, some as wins, which is completely different from long-term investing. This is why it’s initially important to distinguish “trading” from “investing” entirely, and take this into account when reading future learning resources.