Why You Are Investing The Wrong Way

In this video, I’ll tell you 6 ways that you could be investing wrongly. If you are aware of these mistakes, you will be able to avoid them. Enjoy.

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0:00 – Intro

0:39 – Not Understanding The Investment
With meme stocks and WallStreetBets, many investors do not bother to understand what stocks they are buying into. It’s actually not easy to understand everything about the company, like financial ratios and so on. It is much easier to go to WallStreetBets and meme invest instead.

Know that there’s a big difference between investing and gambling. If you are new to investing, there’s safer ways to grow your money, eg index funds, roboadvisors and actively managed funds. When buying stocks, try to at least understand a little about the company that you are buying into. An easy way is to search about the stock on YouTube, then form your own opinion whether the company is good or not.

2:37 – Lack Of Patience
There are many inpatient investors. They only want quick profit. But most fundamentally good stocks won’t go up so quickly, they need time to grow. Amazon and Tesla took many years before they became profitable. The S&P500 delivered an average of 10% a year, while growth stocks in S&P500 only gave around 17% on average. Do not look try to aim for quick returns. Instead just invest in fundamentally good stocks and just hold.

5:16 – Diversifying Wrongly
Another mistake investors make is overdiversifying. It is ok to diversify but don’t overdo it. With so many stocks in your portfolio, you won’t be able to keep track of all of them, and the risk would be high. The other reason is diversification will only preserve wealth while concentration builds wealth. If you are overdiversified, you won’t be able to enjoy the stocks growth.

I recommend having around 5 stocks in your portfolio. It’s more important that you understand the stocks that you are investing in. Also, diversify between industries, because sometimes negative events may affect the entire industry.

7:40 – Timing The Market
Many investors like to time the market. In the short term, nobody knows how where the stock will go. JP Morgan found that if you stay fully invested, you would have the best return. But if you miss out on the 10 best days out of 20 years, your returns would drop by more than half.

Schwab found that if you had bad timing, you would performed worse off than people how had just held on.

9:12 – Using Wrong Brokers
Some brokers charge a very high fee. So use low cost brokers like Tiger Brokers, Moomoo or Interactive Brokers. They are very safe because they are MAS regulated, stores your money and assets in a separate bank account and custodian, and has SIPC insurance for US stocks.

11:18 – No Goal And No Plan
Without a goal and a plan, you would be trading aimlessly. But if you have a goal, you will be able to start working towards it. Having a plan will help you invest properly. The last step is to know when to buy. Using dollar cost average is the best method, you can just consistently buy every month and not worry about timing the market.

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