Stock investment can be a very simple yet very complicated concept. On the one hand, it’s a very straightforward practice: You buy shares of stock, hold onto them for as long as you like, and eventually sell them (hopefully for a profit).
Beyond the fundamental nature of stock investment though, this is a very complicated world. Countless strategies, trading methods, and philosophies are at play, and it can take a lifetime to sort it all out, or at least a portion of it.
Considering this idea, we want to take some time to point out a few surprising or little-known things about stock investment. Granted, four points don’t get you too much closer to that lifetime of accumulated experience. But the more you come to understand aspects of investing you haven’t considered previously, the more informed you’ll be in your financial decision-making. So, here are a few things you may not know!
1. Index Funds Are Severely Under-Hyped
When you explore your different options in the stock market, a few ideas tend to get most of the attention. You can seek to buy individual stocks, and often those that are hyped by experts and analysts; you can pay money into a mutual fund, which will be traded alongside others’ funds on your behalf; or you can trust a professional to manage a whole portfolio for you, for a fee.
But investing in index funds is also an excellent option — one that’s aptly been described as the “antithesis of putting all your eggs in one basket.” An index fund is basically an existing, diversified mutual fund that is meant to mirror the market as a whole, and which you can buy and sell shares in as if it’s a single asset. It’s a straightforward way to enjoy diversified trading and one that should get more attention.
2. You Can Trade Stocks Without Buying Them
If you are looking to trade stocks individually, but you’re nervous about the idea of trying to time your trades, you have another option (and one that’s significantly less hyped even than index funds!). It’s called CFD share trading, and it’s a method of investing in share prices rather than shares themselves.
To illustrate how this works, we’ll present an example. Consider a given stock — say, Netflix (NFLX) valued at $500 one day, and $525 a month later. To profit off of this movement by trading the stock, you’d have had to buy shares at $500 and sell them closer to $525.
To profit via CFD trading, you would only have had to set up a contract stating that you believed Netflix would gain value over the course of the month. It’s a fundamentally different means of investing in the same assets, and one that can appeal to some who are wary of traditional trading.
3. You Can Afford a Robo-Advisor
The idea of robo-advisors has been around for a while now, and there’s an understandable perception that they’re reserved for wealthy traders and hedge fund managers. This may have been true at one point, but today, the average trader can afford various forms of automated investing activity.
In some cases, full-fledged robo-advisor too is available on major trading platforms. More simply and affordably though, you can also enjoy automated instruction and trading through a variety of investing apps. From Acorns to Stash, these apps will manage your portfolio and/or provide trading advice based solely on numerical and strategic analysis.
4. Great Investors Don’t Focus on Wealth
This is a little bit more of an ideological point, but it’s one worth giving some thought to. It’s natural, particularly as a beginner investor, to hone in on wealth and potential gains as your sole focus.
And yet, some of the most successful investors in history essentially preach that this is not a wise approach. Mark Cuban has said that once he found success he started to value his time more than how much money he could make through investment; Warren Buffett has stated that it’s more important to invest in oneself than anything else. Granted, these are easy points for wealthy, successful investors to make once they’re wealthy and successful.
But they’re also speaking to how they got there. Investment should be focused on strategy, personal goals, and total wellness — not the pure accumulation of wealth.
Adopting this sort of mindset can help you to make patient, reasonable decisions, and turn the investment into part of your lifestyle rather than just a financial obligation.
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