3 Tips that Make Confident Investors Successful
By Dale Gillham |
Investing well can be a daunting task, especially for those just starting out. However, we all know one person who has an abundance of natural confidence and skill when it comes to trading. We also see those who struggle to get started on their investment journey, while others struggle to be successful. So what are the three things that confident investors do that unsuccessful investors don’t?
Confident investors vs unsuccessful investors
The first is that successful investors conduct thorough research, while others tend to follow the herd or do what is easy. Successful investors know that investing well is important to their long-term wealth and that in order to achieve their goals, they need to educate themselves, so they can undertake careful research and analysis to invest in the right products at the right time and avoid the pitfalls.
When it comes to buying shares, this may include doing a short course so that they can analyse a company's financial statements or the ability to conduct fundamental and/or technical analysis. If investing in a managed product they would read the product disclosure statement and do a deep dive into how the investment works.
Successful investors also consider the macroeconomic factors such as interest rates, inflation, and government policies that may impact their investment so that they can mitigate any risks. Unsuccessful investors, on the other hand, make hasty decisions without conducting proper research. They jump into a stock based on a hot tip or they invest in the next fad like Bitcoin without fully understanding what they are doing. Their lack of research generally leads the unsuccessful investor to react emotionally, which results in poor investment decisions and subpar returns.
The second thing successful investors do is they take a medium to long-term approach to their investment strategy because they know it’s a marathon and not a sprint to attain financial security. More importantly, they stick to their strategy and don’t get swayed by short-term market fluctuations or the latest investment fad. Instead, they maintain their focus, as they know with certainty that following a well-developed strategy leads to consistent returns. However, unsuccessful investors, often have a short-term investment horizon, as they attempt to make quick profits by buying and selling stocks frequently or chasing the latest investment trend.
Lastly, successful investors manage their risk effectively. They understand that investing always involves some level of risk and they know how to manage their risk effectively. They understand the need for diversification and the importance of spreading their investments across different asset classes, as this helps to reduce their overall risk. Unsuccessful investors often take on too much risk by investing in a single stock or sector, which often leads to significant losses and makes it difficult for them to recover from market downturns.
The road to success is not as hard as many believe it is, it just takes a little time and effort to secure your long-term financial wealth.
What were the best and worst performing sectors last week?
The best performing sectors included Energy up 5.19 per cent followed by Materials up 3.98 per cent and Information Technology down 0.56 per cent. The worst performing sectors included Financials down 2.88 per cent followed by Communication Services down 2.46 per cent and Consumer Staples down 2.02 per cent.
The best performing stocks in the ASX top 100 included Bluescope Steel up 9.91 per cent followed by Woodside Energy Group up 9.22 per cent and South 32 up 7.94 per cent. The worst performing stocks included Downer EDI down 17.17 per cent followed by Harvey Norman down 11.24 per cent and Lynas Rare Earths down 8.24 per cent.
What's next for the Australian stock market?
The All Ordinaries Index has traded down for the fourth consecutive week with the index closing at 7,484 points or just 0.38 per cent in the red. It is now 19 trading days since the high on 6 February at 7,779 points and by last Monday the Australian stock market had traded down to 7,389 points or 5 per cent from the high on 6 February.
During the rest of last week, the market was more positive rising around 1 per cent and with the end of reporting season upon us, I believe we should see the volatility ease over the coming days. So far, the market has retraced into the middle of my target zone for the fall, which was between 7,200 and 7,500 points. However, the high close on Friday is a positive sign that the market is finding support and turning to rise again.
That said, right now it will pay to be patient and wait for confirmation, as further falls to the lower end of my target range are still possible. I encourage investors to be cautious rather than concerned, as things seem to be unfolding in a normal manner and your patience will be rewarded.
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 bestselling and 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