The STRIDE Blog

All You Need to Know About Becoming an Individual Investor

stride-all-you-need-to-know-about-becoming-an-individual-investor-blogIndividual investors are making great returns on their investments every day. They are selecting solid opportunities, receiving substantial dividends and saving a fortune in fees. Their secret? Realising that they don't need investment advisers. 

Financial professionals want investors to feel stupid because they need us to need them. But, to quote Warren Buffett, “You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.”

You Don't Need an Investment Adviser

The value of financial assets under management rose to an all time high of US $70 trillion at the end of 2013. While every piece of marketing literature you read about asset management services will expound the benefits they bring investors, these products are designed to make money for institutions, not individuals.

In 2013, Santander was fined £12.4 million for providing poor investment advice to customers, the largest fine ever levied against a firm for poor advice. HSBC had already been fined £10.5 million for mis-selling investment bonds to elderly clients while Lloyds paid £28 million as a penalty for incentivising its staff to sell financial retail products.

The majority of UK banks have now withdrawn their investment advice services, forcing investors to either pay for advice on trust already eroded, pay for entry into a managed fund over which they have no control or take their money elsewhere.

The guerrilla marketing network of overwhelming and confusing financial language exists to convince investors they can’t invest alone. Once investors have willingly funneled their savings into managed funds, the financial institutions profit from them in fees and commissions - whether investors see a return or not. Illusions are woven into financial language that persuade investors their money is safer managed by someone else than by themselves. Actually, the risks are the same for everyone.

Not to mention hedge fund managers that only invest for themselves. Trustworthiness isn't their strong suit, taking into consideration the millions of Dollars they have stolen from investors through various ponzi schemes.

The Rise of The Independent Investor

30-year retirements are becoming common. The money we accrue during our working lives must now stretch to support us for longer than ever before. Inevitably, we’re looking for ways to invest our money to make it grow.

The world has never been better set up to serve the independent investor. We already know that banks and other financial institutions are using guerrilla tactics to convince us to invest exactly where they want us to - so ignore them.

All you need to become a successful, individual investor is your computer and online banking / trading facilities.

What You Need to Know

All of us face the same amount of risk

You are going to invest in businesses so it is here that your attention should be focused. 
As trading speeds accelerate so does the rate of market volatility and risk. Lowering risk is essential to successful investing. We have already seen that even major banks and eminent financial experts can make costly mistakes and they are as prone to market crashes as the rest of us. Knowing this alone has given many investors the confidence to make the move to independence.

Long-term gains should be your aim

Setting your sights on great long-term returns is the first, most important decision you can make in your investing career. Selecting long-term prospects can only happen after checking the health of the business in question. This means using fundamental analysis techniques to ascertain financial health and forecast growth. It means calculating fair value and determining what the share price should really be. It also means predicting the best time to buy in and sell out to maximise profits.

Diversify to lower risk

Finally, it’s essential to spread your risk by investing in a diversified portfolio. Don’t put all your eggs in one basket. A broad selection of intelligent investments across multiple sectors, geographies and currencies will further buffer a portfolio against risk.

Choose the proper software

It sounds like a lot of work and when Warren Buffett first started out, it was. There are software options available that have automated some of these crucial steps but until recently these have been prohibitively expensive. In fact, it is through the use of such software that investment managers in recent years have selected investments on their clients’ behalf.

But the world is changing. Software that was once the sole reserve of elite financial establishments is now becoming affordable enough for individual investors to use. And it is this sophisticated software coupled with online trading facilities that is fueling the rise of the independent investor.

Selecting the Right Software

The stock-picking platform you choose is going to be your biggest ally in your investing career so take your time selecting one that is right for you. Key features to look for include:

  • A wide reach of businesses, sectors, currencies and geographies to maximise diversification and reduce your risk
  • Clear and comprehensive company information displayed in multiple ways for a truly transparent, 360 degree view of the businesses you’re going to invest in
  • Great portfolio management with both summarised and detailed views of performance status
  • A means of tracking businesses that interest you for future investments
  • Valuations calculated according to value investing dimensions using full fundamental analysis spectrum for accuracy
  • Back test evidence to prove future forecast ability
  • Simplified scoring and rating systems for snapshot evaluation of company strengths and weaknesses
  • Affordable subscription to keep fees to a minimum

In Conclusion

It’s time to trust your gut and lose the doubts: investing can be simple and the best person to manage your investments is you. 

Deliberate Confusion Around the Stock Market?

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Topics: Deliberate Confusion

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3D Value Investing uncovers the best businesses for investment, the fair value of those businesses and the best times to buy in and sell out. This approach to long-term investing results in higher returns with lower risk.

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