Investing 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?
Research
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.
Long-term approach
Secondly, wise investors take a 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.
Manage risk
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 are the best and worst performing sectors this week?
The best performing sectors for the week (at time of writing at midday Friday) include Energy which is up over 4% followed by Materials up over 3% and Industrials, which is just in the red for the week. The worst performing sectors include Financials and Communication Services, which are both down over 3% followed by Healthcare down over 2%.
The best performing stocks in the ASX top 100 include Evolution Mining Ltd (ASX:EVN), Woodside Energy Group Ltd (ASX:WDS, LSE:WDS, OTC:WOPEF) and Bluescope Steel Ltd, which are all up over 8%. The worst performing stocks include Downer EDI Ltd down over 17% followed by Harvey Norman Holdings Limited (ASX:HVN) down over 11% and Pilbara Minerals Ltd (ASX:PLS) down over 9%.
What's next for the Australian stock market?
The All Ordinaries Index has once again traded down for the fourth week. It is now 18 trading days since the high on February 6 at 7,779 points and by Monday the Australian stock market was down to 7,389 points or 5% from the high on February 6.
During the rest of this week the market has been more positive, rising around 1% and with the end of reporting season upon us, we should see the volatility ease over the coming days. The market is currently sitting in the middle of my target zone for the fall, which was between 7,200 and 7,500 points. Therefore, a high close on Friday would be a positive sign that we may see the market find support and turn to rise.
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.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au