Three investing tips from eToro for traders wanting to reach their peak potential
Link copied to
All journeys have their moments of frustration and boredom and the experience of investing in shares and securities is no different to any other long travel trip by road, rail or air.
Anyone starting a journey will likely research their destination and ideal rest spots along the way, and listening to an experienced traveller with tips and advice can help as well.
eToro‘s Australian managing director, Robert Francis, has some guidance for relatively new investors to the markets that may help smooth their investment journey.
Robert gives his three top tips for stock investing based on his years of experience from being involved in the financial and equities markets and here are his takeaways.
This is a typical response from investors who lead with their emotions, over logic.
Instead of adopting a long-term investment strategy, these investors attempt to get rich quick by engaging in impulsive short-term trading.
In reality, this strategy leads investors to fail hard and fast because they don’t give their investment enough time to flourish and deliver returns.
These investors often seek an adrenaline rush from high volatility periods and fail to realise the benefits of sustained, long-term investment strategies.
By buying and selling stocks too rapidly, investors risk entering and leaving the market at the worst possible moments, and are more likely to lose or limit their earning potential.
Instead: Investors should opt for long-term investment strategies that will help them reap returns in the long run.
They should also consider diversifying their portfolios with a range of stocks from different industries such as tech, EVs and energy.
A diversified portfolio allows investors to reduce their risk, without losing possible returns.
The stock market equivalent of procrastination, the “I’ll do it later” attitude can form in the minds of aspiring investors who put off making any investment choices, while they wait for prices to fall.
Often born from uncertainty or fear, investors that hold this mindset generally miss prime opportunities due to their indecisiveness.
Instead: Everyone wants to catch the dip, but it’s near impossible to time the market.
Follow a strategy like dollar-cost averaging, which emphasises ignoring market fluctuations and instead invest a fixed amount of money at regular intervals with a long-term view to drive higher returns over time.
As many smart investors know, markets are unpredictable especially as we saw during the global pandemic.
There were high levels of volatility surrounding different industries, so waiting for the market to be ‘stable’ is like waiting for rain during a drought.
The logic behind this excuse is also flawed, as these investors say they are waiting for the market to stabilise.
What really tends to happen is stock prices continue to positively correct themselves (especially after a major dip such as the March 2020 market trough), causing investors to inevitably pay a higher price for the shares that had taken a hit.
Instead: The market constantly fluctuates and long term periods of stability can be difficult to anticipate. Instead of hoping the market will stabilise, it’s smarter to learn about the variables that impact market volatility, and how these have played out historically.
Keeping an eye out for things like company reports and updates is important.
However it’s a good idea to look out for macroeconomic events such as unemployment figures, GDP, reserve bank memos and major regulatory announcements.
Good luck and happy trading.