Learning Resources

10 Honest Investing Tips for Stock Investors

29 Nov 2021

10 Honest Investing Tips for Stock Investors | VI
(c) Sadie Xiao

It’s human nature to seek help before starting a new chapter. So we’re not surprised you’ve searched for investing tips to help you out as you flip the page and jumpstart something new – your investment journey.

Admittedly, we all start as beginners. Even the investors in our community started from zero knowledge. The key is the willingness to learn every day and to never stop accumulating knowledge. After all, that’s how we become better people, and yes, better investors.

For your learning adventure today, we have listed ten investing tips our community of investors have been doing. We hope you have a successful investing journey and remember you can always join our community.

Investing Tip #1: Set goals

Investing Tip: Set up SMART goals | VI

Always have a goal in mind in whatever you do. Just like how you set your fitness goal when you first purchased your smartwatch or how you jot down your New Year’s resolutions every year, do also decide what your ultimate goal/s is/are in investing.

But please don’t just say “I want to be financially free” or “I want to have more money” because... don’t we all?

Make your goal more concrete. Make it SMART (specific, measurable, attainable, relevant, time-bound). What amount do you want to have to be financially free? How much money do you want to make from investing? What timeline are you looking at?

A simple yet clear investment goal can be “I want to have $100,000 in my stock portfolio after 12 months.” With such an objective, it’ll be easier for you to strategise how to achieve such an amount within the timeframe you’ve determined.

You become more driven when you have a goal because you know which road to take, what to prepare, and how much to tank up. Otherwise, it’s like driving to wherever the road takes you or until your gas runs out. What if you end up in a dangerous place? What if you reach a dead end?

Goal setting is something you only can do. You have to do it for yourself as we don’t know what your preferences and current financial status are.

What you can do as a first step to setting up your investment goal is look at your finances, e.g., your expenses, your savings, how much you’re willing to invest, how much your emergency fund is.

Then, look at your risk tolerance. If you have purchased insurance before, you have already answered a risk tolerance assessment. 

Knowing your level of risk tolerance is necessary for setting your goals because it will determine if your goal is attainable given how much risk you can tolerate. The rule of thumb is to only take as much investment risk as required by achieving your goal.

Investing Tip #2: Start as early as you can

“The secret of success is to start early.” We’re not sure if you’ve heard this quote before or perhaps a version of it, but it rings true in investing as well.

Investing has high returns because of the power of compounding interest. The key to this is time. Hence, the sooner you start to invest, the higher your compounding returns will be and the lesser money you need each year to reach your investment goals.

If you can’t imagine how compounding works in investing and why you need to start as early as you can, come to our free two-hour online masterclass where we show you tangible proof of this.

Investing Tip #3: Do it consistently

In investing, it makes more sense to plan for it for the long term. Part of this planning is setting aside an amount each month that you’ll put into your portfolio. It doesn’t matter if it’s a relatively small amount, as long as you do it consistently.

By doing so, you can avoid stalling or procrastinating. Likewise, the monthly top-ups to your investment funds can help you ride out market volatility.

Typically, an average investor would save 20% of his/her monthly income for savings and/or investment.

Investing Tip #4: Refrain from listening to market noises

Investing Tip: Don't listen to market noises | VI

The stock market is never a quiet place. Every day, you hear news and noise. And sometimes you cannot even distinguish which is which. What we always teach our investors is to never fall for market noises.

Oftentimes, these noises come in the form of financial news or hot stock tips or emotional headlines. Understandably, the majority of unknowing investors get blinded by emotions and make ill-informed decisions, eventually getting into trouble.

This is why it is of utmost importance to dive deep into every stock’s fundamentals before buying. If you’re confident about a stock’s performance, why would you fear the slightest change in share price? If you know your investments well enough, why would you panic just because of one headline?

Investing Tip #5: Only invest in what you understand

Investing Tip: Invest in what you know | VI

As mentioned in the previous tip, knowing the stock well will help you move away from market noises. It always helps to remember this basic fact in stock investing: Stocks are businesses or companies.

When you invest in a stock, you’re investing in a business. Ergo, it doesn’t help if you pick stocks blindfolded or if you pick stocks based on the sound of its ticker.

Really knowing the company, its management, moat, business model, financial performance, historical growth, et cetera, will not only ensure you’re investing in the right place but will also boost your confidence in that particular investment.

It’s illogical to invest in 30 companies when you don’t even understand each of them. But you might say “the more stocks, the diverse my portfolio is.” It could be diversified, all right, but are you confident each is going to help you achieve your goal? How are you going to review each stock’s performance when their financial statements come out? It will be very difficult to manage, especially when you don’t even know what you’re buying.

Why not trim down your choices into the businesses that you know. We call this the “circle of competence.” What are the stocks you’re familiar with, i.e., stocks you’re a customer of, stocks you know from your surroundings? Check the fundamentals of these stocks and go from there.

Investing Tip #6: Avoid timing the market

An investing tip that is rather overused but always handy is “Do not time the market.”

Both beginner and experienced investors often fall into this trap. What few don’t understand is even the investment experts or professionals don’t have an idea on when the market will go up or down and for how long.

Investing in stocks come with an understanding that the stock market is volatile. There’ll be times when it’ll be a bearish market and a time where it’ll be bullish. Hence, to ride out this volatility, you can consider investing consistently and have a longer-term outlook. Your time in the market is definitely better than timing the market.

Investing Tip #7: Choose to invest for the long term

Investing Tip: Invest for the long term | VI

We’ve settled this in the above tip: Long-term investing yields good returns, especially if you’re still a young investor navigating the market. Not only will you profit from capital gains and compounding returns, but you can also invest in dividend stocks and receive stable passive income.

While there are people who opt to do short-term investing, our community of investors follow Warren Buffett’s strategy to only buy a stock you want to own for at least five or ten years.

As he said, “Our favourite holding period is forever.” And this makes sense because why would you even buy a business you believe won’t grow or give you profits in the next ten years or so?

It can be best compared to marriage. Don’t marry someone only to let them go after a couple of years. Marry someone with the intent of being with them forever.

Investing Tip #8: Don’t forget to review your portfolio

Once you have invested your money, it doesn’t mean you’ll sit pretty and just wait to receive dividends or returns. It’s crucial to review your portfolio now and then as the economic climate often changes.

As such, you should assess if your investment choices are still the most profitable ones that can help you reach your goal. It’s good to revisit your portfolio annually.

Investing Tip #9: Differentiate between price and value

Investing Tip: Differentiate between share price and value | VI

Another mistake of beginner investors is to look at the share price and share price alone when making investment decisions.

Yes, you have to look at the price before buying, but it’s not the only thing you have to look at. More importantly, check the value. Does the share price justify its value? Or is it overpriced? Would you buy a $300 bag if its value is only $200?

Price and value are different. Smart investors look at value first before looking at the price. Usually, it’s better to buy undervalued stocks and wait for them to grow over time. Again, this lies in your assessment of what the intrinsic value of a stock is.

Investing Tip #10: Be wary of commissions

One last tip, and perhaps the most practical one, is to be cautious of commissions. With every trade you make, you pay a fee. Hence, be strategic when it comes to buying and selling your stocks as commissions might eat up your profits.

There you have our ten investing tips. We hope they made you more confident to start your journey. Best of luck!

For more investing tips, you're welcome to join our free two-hour webinar.

DISCLAIMER

This article and its contents are provided for information purposes only and do not constitute a recommendation to purchase or sell securities of any of the companies or investments herein described. It is not intended to amount to financial advice on which you should rely.

No representations, warranties, or guarantees, whether expressed or implied, made to the contents in the article is accurate, complete, or up-to-date. Past performance is not indicative nor a guarantee of future returns.

We, 8VI Global Pte Ltd, disclaim any responsibility for any liability, loss, or risk or otherwise, which is incurred as a consequence, directly or indirectly, from the use and application of any of the contents of the article.