The days are getting shorter, the nights are getting longer, and the autumn season is upon us.
But that chill running down your spine may not be the handiwork of a lurking monster beneath the bed. Financial frights can be just as foreboding—and even the most seasoned investors aren’t immune to the dread of being left in the dark.
According to a recent survey of nearly 2,000 investors by moomoo, a professional trading platform that offers access to commission-free trading, the top fears haunting investors include uncertainty around how to pick a stock (27%), how to decide when to buy/sell (17%) and how to know when to stop loss and take profits (15%). With market conditions as unpredictable as ever, it’s understandable for investors to worry about how to protect their portfolios.
Fortunately, there are several tricks that investors can use to conquer their fears this fall.
Learn From Investment 'Ghost Stories'
While no investor has a crystal ball to predict what’s ahead, gaining insight from the past is a surefire strategy for building a more future-proof investment portfolio.
When it comes to investing, knowledge really is power. Luck can lead to short-term gains, but for money that lasts, you should continuously improve your understanding of investment targets. This means shining a flashlight into every dark corner to uncover insights on the fundamentals, the industry’s social environment, the international financial situation, how capital is being deployed by expert investors and how regulatory and policy shifts could impact your decision-making process.
An investment strategy should never be static. Continually adjusting strategies based on past experiences can help stabilize profit, ensure margin of safety and avoid large capital losses.
Trade Tricks For Treats
Learning how to spot a poor investment opportunity upfront can keep investors from feeling sick after the initial stock-surge “sugar rush” wears off.
Remember that buying stock is like buying a portion of a company. Just like you wouldn’t buy a house without first having it inspected for foundation issues or “skeletons in the closet,” it is critical to do your due diligence on a company’s overall strength before choosing to invest. A few key indicators that determine a company’s overall strength include growth potential, business model, core competitiveness and defensible moat. If one or more of these factors is flawed, or the company’s fundamentals are questionable, investors should take pause.
Some additional tips to keep in mind:
• If you’re unfamiliar with an investment target, establish a deeper understanding of the business before investing.
• Don’t put all your eggs in one basket, as a diversified investment portfolio can reduce risk.
• Carefully consider your portion size. It is best to set the maximum position size of a single investment target.
• Properly determine your positions. Try not to put all your money in one position—otherwise, there won’t be enough funds to invest when good opportunities arise.
• Consider reasonable use of diversified investment categories, such as options and futures for hedging, smoothing market fluctuations and resisting risks.
Minimize The Fear Factor
To keep an investment from coming back to haunt you, it is critical to evaluate it from both a short- and long-term perspective.
From a short-term perspective, investors should focus on market sentiment and capital trends. Market sentiment is generally affected by news, which can impact capital. For example, good market news can give investors the impression that listed companies are enjoying substantial growth gains in the short- to medium-term. On the other hand, the short-term “profit-making” effect of market attention brought about by external news can attract investors to continue buying, potentially leading to short-term stock price changes.