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4 Long-Term Trading Considerations For Beginners
Investing is a tricky business to get into for beginner traders yet investing continues to grow in popularity. For starters, if you do a Google search, you’ll get bombarded with a variety of new terms, some investors telling you one thing while other investors are telling you to avoid something else.
- Who do you trust?
- What path of investing do you take, and is it worth your time to invest?
Anyone can benefit from investing. Many families choose long-term investing as a way to save for retirement, college funds for their kids, or a big family vacation in a few years.
Long-term investing is great because you can choose your investments and let them be for years to come. However, you still need to check on them and have a strategy, or at least a broker to help you. Are you ready to start investing? We have four long-term trading strategies that could help get you on the path to success.
1. Remember, It’s a long-term commitment
Many first-time investors face a common downfall when short-term movements are happening in their investment, and the movement is in the wrong direction, emotions and inexperience tend to take over, and this is where mistakes can happen.
When someone sees their stock starting to dip, a common reaction is to sell right away.
However, as a long-term investor, it’s important to remember that small movements happen that don’t reflect the bigger picture.
Hang tight and look at the larger picture of your stock. Make sure you do your research, preview fundamentals, balance your portfolio between growth and value, and have dividend-paying stocks offset downturns in your performance.
If you notice a downward trend that hasn’t budged, then that could be a sign it’s time to sell. If you find small drops before the price picks up again, you’re likely in a good position to wait it out.
2. Balance your portfolio
You’ve likely heard the saying, don’t put all your eggs in one basket. Well, that saying is true when it comes to investing. Putting all your money into one stock or trade is very risky. If that stock underperforms, you lose everything.
Every trading strategy should include diversifying your portfolio. You may have a few stocks more heavily weighed than others, but they all help balance your portfolio. That way, if a few stocks aren’t performing as you thought, you can fall back on the other ones still holding strong.
3. Find a trusted broker
A good idea to include in your strategy is a broker, but not just any broker. You need to find one that is reliable and regulated to keep you and your money protected. Here are some good South African trading brokers to consider.
Your broker can provide insight into trades, keep tabs on your portfolio when you can’t, and recommend what action to take to benefit it. A reliable broker will help you succeed because that means he or she succeeds as well.
4. Pick the right account
For long-term investing, you have various account options to select from all with different pros and cons. Choosing the right account for your investing needs is crucial.
Do you go for a TSFA, RRSP, or even an RESP?
Some accounts are more suited for long-term retirement savings, while other accounts are best for general savings.
If you’re unsure, your broker can help with this decision, by evaluating your needs and risk appetite and recommending the product that best suits your goals and income.
Start your trading journey
There is no single winning strategy, and investing is about gauging risk, and time in the market, there is no wealth without work whether you’re an active or passive investor.
As wages remain flat and inflation continues to creep into your paycheque, investing becomes more important for retail investors.
Suppose you feel like it’s time to put your money to work for you and grow your wealth with long-term investing. Then we suggest keeping the above four considerations in mind when building your trading plan. A well-thought strategy can be the difference between earning and losing.
Have you started your investing journey?
Have you started to try and improve your savings? How is it going? Do you have any tips you feel should be added to the list? Share it with us in the comments and let's help South Africans save even more.
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If you enjoyed this post and have the time to spend diving deeper down the rabbit hole, then we suggest you check out the following posts about improving your finances in South Africa.
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