What’s the biggest difference between pro and regular investors?
It’s not a hyper-expensive trading terminal… Pro investors have time to continually watch the stocks they’re following. Combined with disciplined investment behavior, it lets them manage risk and seek opportunities in ways that’s often too time consuming for non-pro investors. Simply put, they are more dedicated stock watchers.
The frequency with which you buy and sell should depend on your personal financial goals and risk tolerance. For long-term investors, it’s important to not get distracted by short-term market movements. Most investors try to achieve this by simply checking portfolios less frequently. In a survey I conducted in 2020 of 500 retail investors, over 45% said the checked-in monthly or less.
Companies and markets can change quickly, so neglect is a bad investment strategy. Being passive is not the same as being uninformed. The price for confusing “Buy-and-Hold” with “Buy-and-Ignore” is harsh.
Reading financial statements, following industry news, and understanding a company’s business model and competitive landscape takes serious time. Especially if you have a whole list of stocks.
Many investors supplement with social media channels and subscribe to professional services like Motley Fool, Seeking Alpha and The Street. These commentary and analysis services specialize in buy and sell signals and are not optimized for keeping long-term investors in the loop. They may or may not cover the investor’s stocks, for long periods.
So here are some tips to keep you in the loop:
- Always seek multiple perspectives before investing. Use multiple sources and read both the buy and sell analysis.
- Special information dynamics apply for IPOs and ‘hyped’ stocks. Be extra diligent for skewed and biased information before jumping on the band-wagon.
- Sleep on it. Let your thoughts settle and use critical thinking before making big decisions. If you have a long horizon, you can afford the extra time.
- No matter the source. there is no such thing as a cheap stock. The current price is just the consensus of the moment formed by the buyers and sellers. If it trades at a high or low valuation – it does so for a reason. Understand the reasons before and while you’re invested.
- Define success and failure by establishing price targets. The easiest way to take some risk off the table is by adding automatic stop orders.
- You will forget! Use notes to remind yourself of your targets and rationale.
- Be careful of your own biases and dynamic reasoning. Did you change your targets based on a new analysis or on emotion/intuition?
- Be especially aware of “pump and dump” mass promotion on social media sites.
- Never rely on a single analyst’s recommendations and be aware of biases. Numerous studies have shown that “sell” recommendations are far less frequent than “buy” and “hold”.
- There are many valid reasons for insiders selling stocks, but pay attention when company insiders start their own stocks personally.
StockHawk is a stock watcher service that specializes in keeping long-term investors updated, in the most efficient way possible. Not just a snapshot of price and profit/loss, but making it simple to keep an understanding about what is happening and how it impacts the future direction. Ideally in a few minutes a day.
Disclaimer: If you’re unsure about how to invest, consider seeking the advice of a financial advisor or professional. They can help you understand your options and make informed decisions about your financial strategy.