As a professional trader, I live with risk on a daily basis. Buying shares online yourself, or with a full service broker, there is a level of risk that all investors must accept. Unless you want to store your money under the mattress! But this too can include Risk that a burglar might find your stash and rob you blind.
For the Average Investor
For the average investor, the true Risk of the stock market is of share prices falling. It doesn’t matter whether you are a long-term investor passively receiving dividends, or if you are actively trading swings in the markets. A fall in share prices will mean a fall in value to the hard earned capital you have invested.
There is an old saying in the markets “Bulls take the stairs, but the Bears take the elevator”. What this means is that stock markets take time to rise, but they can fall very quickly and sharply.
But fear of the markets falling is an emotion, and it is something that can easily be controlled or managed. So let me help you out with three tips on how to avoid the Risk of buying shares online:
1) Get the right advice
2) Know the Right strategies
3) Implement Money Management
Get the Right Advice
If you’re sick, you see a doctor. If your car has broken down, you call a mechanic. If you want to invest in the stock market, call an advisor! In all of the above scenarios, you can learn to do these tasks yourself. You can learn how to be a mechanic. You can study medicine. You can also learn to understand the stock markets.
It takes Time
However, you don’t become a mechanic overnight. Or a doctor, or a professional advisor. It takes time to learn, and even as a professional, we have checks and balances in place to continually revise and evaluate our trading decisions.
When you are first starting with your investing or trading career, you should have one goal in mind: To invest for the long-term, and to compound your investments.
I bet you thought I would say “To make money!”
Reality is, making money is the result of successful investing or trading. Hence, your focus should be in adopting the right tools and advice, managing your positions, and executing your strategies.
To assist you buying shares online, the services of a professional advisor will more than pay for themselves. This might be in the form of a Subscription service where you are provided with recommendations to trade, or it may be a Coach who helps you with your education. Or even a Full Service Broker.
Know the Right Strategies
Did you know you can make money when the market is falling? Or that you can purchase insurance against your share investment/s?
There are many different ways an investor can participate in the markets. Such as; CFD’s, Options, Warrants, Futures, Future Options, Currencies, Exchange Traded Funds (ETF’s), Indices, as well as Shares.
Some strategies need the underlying price to rise in value to make a profit. Other strategies will profit as the underlying price falls. There are even strategies that will profit from the underlying price remaining sideways.
You can also trade anything in the world due to the technology that is now available. Stocks on the Australia, US, UK, French, Singapore or even Indonesian markets are easily accessible. You can trade a listed Fund that invests in Russia, Crude Oil, Gold bullion, Brazil or China. There are even listed Funds that trade in futures contracts over falling prices – these are referred to as Inverse Funds.
Get the Right Advice
If you get the right advice about the markets, you can then implement the right strategy to suit the outlook no matter whether that is up, down or sideways. Knowing what strategy to adopt when buying shares online will make the decision-making process all that much easier.
Implement Money Management
Finally, it doesn’t matter how good your analysis is, or how many strategies you adopt. If you don’t manage your trading account professionally, you could lose all your money in just one trade.
I once heard a seminar speaker telling learner traders that they could turn $2,000 into $1million in only 9 trades! Amazing! If you took $2,000 and made 100% profit, you would then have $4,000. If you traded that and made another 100%, you would have $8,000. Trade that for a 100% return and you would have $16,000. You get the picture.
My advice to you is that if you placed all your capital down on one trade and that happened to be a losing trade, how gutted would you be if you had just lost $500,000 trying to reach that $1million target in just one trade?
Different strategies have different levels of Risk. When you are buying shares online and adopting strategies to profit from upwards or downwards price movements, you will want to diversify your total account value and ensure you don’t have all your eggs in one basket.
Traders starting with a small capital
For traders starting with small amounts of capital, there is higher Risk in buying shares online. You cannot diversify efficiently, and that increases your Risk of investing. But we all have to start somewhere! Just don’t put all your capital down on the one trade and use the “Hope and Pray” method expecting to get rich overnight.
If you need help
Well, that’s my three easy steps to avoid Risk of buying shares online. I hope you find them helpful, but I’m sure many of you have heard these all before. The question I pose to you now is what are you going to do to change what you have been doing in the past, so that you have success in the future?
Matthew Brown – US Stocks & Options specialist
Halifax Investment Services
ASIC Australian Financial Services License Number – 225973
If you would like to learn more about the strategies you can use to profit from any type of market direction, visit www.australianinvestmenteducation.com.au or you can contact Matthew on firstname.lastname@example.org
Matthew is an Authorised Representative of Halifax Investment Services (Halifax). Halifax provides broker services, including Full Service and Discount Services using multiple trading platforms. For Discount platform services, Halifax charges the same fees for phone service as the online trading platform.