5 tips for handling the new stock market norm
Published 12-FEB-2021 15:05 P.M.
4 minute read
Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.
In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.
The below articles were written under our previous business model. We have kept these articles online here for your reference.
Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.
Click Here to View Latest Articles
In 2021, retail investors are asking how to profit from the stock market in this new COVID market environment. Some are questioning if the current conditions are the new normal and what this means when it comes to investing in the stock market.
Let me begin by saying that while times change, people do not. This statement is important to understand because the stock market is a reflection of human emotion that operates on fear and greed. Therefore, the fundamentals of sound investing and trading have not changed.
What has changed is the amount and speed of information that we receive about the stock market. Now, more than ever, we are bombarded with information pretty much every second of the day. However, despite having more information, we are still reacting the same way we always have, we are just reacting faster, which is why it feels like things have changed.
So to help you manage yourself in this new environment, I have provided my 5 tips below.
- Know your why – When it comes to trading the stock market most people tell me they are investing to make money, but it is what this extra money can do for you and how it will change your life that is your why. Once you understand this, then “what you do” and “how you do it” becomes easier. When you have goals and you focus, you become less distracted. Too much information and more choice leads to overwhelm and confusion just like a child in a lolly shop. But when you are focussed, you will ignore what is not relevant and, in turn, make your life and your decisions simpler and easier.
- Follow sound principles – The fundamentals of good investing don’t change and following the herd is not, and never will be, part of a sound investment strategy. While you may make money a few times, as some investors did with Gamestop in the US recently or when stocks rise strongly from time to time, the law of averages suggests that if an investor continues to follow the herd long enough, their gains will be lost.
- Buy quality over quantity – An investor who continually selects good quality stocks instead of the next hot tip or internet sensation has a vastly higher chance of achieving two things. Firstly, they will build a sizable portfolio over time and secondly, they will achieve this much faster than those who choose to speculate.
- Never invest in something you do not know or understand – As a professional, I receive many different investments opportunities but when analysing these investments my first question is not about how much money I will make, it is about how much risk I am willing to take. Investing in something you do not understand increases your risk significantly and generally leads to emotionally charged decisions, which is never a good thing.
- Get an education – Lastly but not least importantly, if you want to invest in the market, make sure you know and understand how to trade the trends. Too many individuals invest only to find it is not what they thought or they are unable to manage their emotions because they lack the knowledge and experience about what is unfolding in the market. It is far better to get a quality education than it is lose your money to the market. Remember, your education will cost you one way or another but this in this new COVID environment, the right education will ensure you make more than you lose.
Before I finish up, there is one more point I would like to share. While we are bombarded with information from an increasing number of sources, it is important to understand that when it comes to investing, less is more. So be very selective as to where you get your information from – it may pay to only rely on two or three quality sources. Above all, do not assume information is education and do not make the mistake that having some knowledge means you understand how to trade or how the market works.
Today, more than ever, investors mistakenly believe that simply because they have more information at their fingertips they are better equipped to invest. However, not all information is good information and sadly, in this environment, you cannot always rely on the information you hear and see. So be selective.
For now, good luck and good trading.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online at www.wealthwithin.com.au
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.