Unless you know what you want to trade, don’t ask me what the best trade in the share market is right now!
The question of “what is the best share to make money investing in the share market” is a loaded question. For a random person, who I have no professional relationship, to ask me what I think is the best stock to choose right now, is a loaded question that I just can’t answer. If someone asks me this question, I know they are not serious about investing in the markets.
In fact, if I were to suggest a stock to such a person, it would be a random hit or miss as to whether that person was profitable. I wouldn’t know if they were adding to a portfolio, or if they were going to load up their savings and bet the farm. I wouldn’t know how long they wanted to hold the position. Thus if they were looking for short-term gains or long-term dividend returns from the share market. And most importantly, I wouldn’t be able to advise when was the best time to exit that stock position.
You may be in a scenario, however, of not knowing where to start. And that’s fine, as we can help guide you towards answering the key questions for you to make an informed and strategic decision on where to put your hard-earned cash.
So instead of asking “what’s the best stock to buy right now”, here are 7 questions you need to ask yourself to ensure you get the most out of my professional experience for share market investing.
- How much capital do I intend to invest? The age old saying “it takes money to make money” is actually very true. The more funds you commit to the share market, the more we can work strategy to turn a profit and manage your Risk. Smaller amounts of money will make it a little more ‘hit and miss’ in choosing positions, and offer no ability to balance amongst stocks/commodities/currencies
- Do you want to actively manage your capital, or find someone to do the hard work for you? This basically means, do you want to spend the time learning the techniques that will give you the knowledge to manage your money in the share market, or are you happy to pay a professional to do the job?
- What is your Risk tolerance? Can you sleep at night if a position (or number of positions) you hold in your trading account are losing money? Are you afraid of losing money to the share market? If you are, then you need to adopt strategies that are lower Risk. Of course, you are not investing in the markets to lose it all, but knowing what your Risk tolerances are will provide a guideline for what action you need to take.
- Have you established Goals and Objectives? Just investing in the share market “to make money” isn’t a valid enough reason. In fact, making money is the result of achieving your goals and objectives. Some example goals and objectives are; to create a secondary income, to build towards retirement, to create a cashflow, increase wealth; diversify investment portfolio for tax effectiveness; and many more. This may also involve establishing a performance benchmark, but only if it is realistic. Expecting to make 1000% return in 12-months may not be realistic if you have never traded stocks or options before.
- Do you know what type of trading/investing you want to do? There are many different approaches to choosing positions for long-term or short-term trading or investing in the share market. The person that constantly chops and changes from one method to another has no consistency in results, and is destined to fail. This is where guidance in choosing an approach is best sought sooner rather than later.
- What type of time-frame are you wanting to trade? The shorter the trading time-frame, the more interactive you need to become, indeed making snap decisions in seconds or minutes. The longer the time-frame for investing, the less interactive you want to be. Specifically to ensure you do not get involved in the emotional roller coaster ride of day to day activity.
- Are you aware of the costs of trading/investing? Nothing comes for free. If you are using smaller amounts of capital to trade/invest, then brokerage costs will eat into any profits you make. You need to be aware of all costs that will influence your bottom line.
These are the starting questions. I get new clients to answer before I can move forward and start discussing what stocks to invest in. As you progress through your journey of becoming a self sufficient trader/investor. You will need to establish more guidelines and answer many other types of questions. Success requires continual development where the responsibility of finding. Researching and answering the right questions rest on you.
Matthew Brown
US Stocks & Options Client Advisor
Halifax Investment Services
ASIC Australian Financial Services License Number – 225973
