Hellen Njeri @njerihelen
Online investing has never been easier than it is right now. There are so many options and many of them give you the tools you need to make great returns online. But which ones are trustworthy and which ones are out to milk you dry?
And even when you do find the right place to put your capital – what can you do to ensure you do not lose it due to bad decisions and beginners’ mistakes? Here are some top investment tips to help you secure your financial future and boost your chances of an early and successful retirement.
Check your emotions at the door
“Success in investing does not correlate with IQ, personality or such respected qualities … what you need is the temperament to control the urges that get other people into trouble in investing.”
That is wisdom from Warren Buffett, chairman of Berkshire Hathaway, oft-quoted investing sage and role model for investors seeking long-term, market-beating, wealth-building returns. Buffett is referring to investors who let their heads, not their guts, drive their investing decisions.
In fact, trading triggered by emotions is one of the most common ways investors hurt their own portfolio returns. All the investing tips that follow can help investors cultivate the temperament required for long-term success.
Luckily, by using a trusted online broker like you are faced with a barrier to emotional spontaneous reaction. You will be advised and warned prior to making a dramatic decision that you could live to regret.
Trade with companies you believe in
Large part of investing is actually emotional. It is about striking a balance. Choosing companies based solely on hard logic is not the approach of a well-rounded investor. A strong belief in the company, the team and their mission is fundamental in taking your capital to its full potential.
You want to know how this company operates, its place in the overall industry, its competitors, its long-term prospects and whether it brings something new to the portfolio of businesses you already own.
After you are equipped with that knowledge, use it to make a decision and then implement accordingly based on both logic and your compatibility with the company in question.
If you would prefer to have someone more experienced and knowledgeable to walk you through this, there are a cluster of great brokers who would be more than happy to take you through the decision-making process step by step. Once again, you cannot go wrong with a trusted online broker.
Plan ahead for trying times
All investors are sometimes tempted to change their relationship status with their stocks. But making heat-of-the-moment decisions can lead to a classic investing blunder: buying high and selling low.
Keep a record of every stock in your portfolio worthy of a commitment and, while your head is clear, make a decision. Do not wait until the panic sets in to make a decision.
Selling out of fear, panic or uncertainty is never the right approach. Instead, have a list of criteria that would justify an immediate sell and sell only when these criteria are met.
If you are working through a broker, communicate your thoughts to them and allow them to guide you in coming up with this list of criteria. Most brokers will always be excited to work with investors who take an active interest in their portfolio and will be more than happy to guide you.
Build slowly, steadily and cautiously
Investing in a company is committing to a company and its long-term vision and potential. Jumping in suddenly with a huge position or commitment that you will drop just as quickly as soon as the next shiny object comes around is not the way to go.
Instead, you should slowly roll out your position in the company you believe in over time. This way, you are more motivated to keep informed on the financial movements of the company and are not going to be caught by surprise if there is a sudden drop in value.
Buying in thirds is a common practice that involves splitting the amount you decide to invest into three parts and investing them at different times. This can be done based on developments at the company or based on quarterly reports.
Most brokerage firms allow you to divide your investment over time and buy in thirds and will advise you when to invest and when to wait.
Avoid overactive trading habits
Amateur traders tend to get obsessed with daily and hourly changes in their portfolio. They will often waste time refreshing their dashboard to see what is changed and, unless you are day-trading, this is a mistake. You only really need to check on your stocks once per quarter.
Sure, it is important to keep tabs on the companies that you are investing in, but realistically day-to-day changes are not where your mind should be at.
If you are working through a trusted online broker, then you need to worry even less as they will be doing the important monitoring for you and giving you feedback when you need it. By following these basic tips and working through a trusted broker, doubling or even tripling your opening investment is feasible.