The stock market is an ever-changing symphony of climbs and dips. Quite likely the only stable thing about it is the steady stream of investors who try, with varying degrees of success, to predict its chaotic behavior. But the ability to play the market with absolute certainty is about as common as hen’s teeth.
Rule 1: The perfect moment. There is a perfect moment for every investment - but unfortunately that perfect moment only becomes obvious after the fact. The rearview mirror is always clearer than the windshield, but here’s the bottom line: Choosing the right time to make a trade is, above all, a matter of luck.
Rule 2: Those fail-proof insider tips. Arming yourself with market information which you alone are privy to is your best bet at short-term success on the stock market. Unfortunately, the moment that valuable data is made available to anyone besides you, it almost instantly affects market rates - and becomes anything but insider information. Sure, there is genuine, profitable insider trading going on out there, but in most cases it’s illegal.
Rule 3: The investment gurus. Not a day goes by that doesn’t see dozens of stock market experts (some more qualified than others) send thousands of stock market forecasts your way. Not surprisingly, this expert advice doesn’t amount to much in the real world of trading, where even sound market wisdom is just a scratch in the surface of an almost infinite array of factors and variables. The fact is, if the tips offered by stock market gurus were really the key to long-term success, most of these «experts» would have better things to do with their time (and enormous wealth) than trying to sell you on their trading secrets.
Rule 4: Those nasty charges. Playing the market is a game of variables, but one thing that you can calculate are brokerage fees. No matter how well your shares perform, higher brokerage fees always mean less money in your account at the close of the year. Do yourself a favor and choose an affordable broker.
Rule 5: The bottom of the barrel. Making trades like there’s no tomorrow might make you feel like a pro. But buying and selling shares too frequently usually gets you little more than a long list of brokerage fees. Add stock exchange fees and taxes to the equation and you might just be scraping the barrel before you even get warmed up. Limiting yourself to fewer, more long-term investments normally makes more financial sense.
Rule 6: The big picture. If you look at the stock market over the long-term, it’s always gone up - at least so far. In the short-term, dips and dives are a regular occurrence, and in the case of major financial crises these downward trends may last for several years. Patience is a virtue which you as an investor would do well to possess.
Rule 7: The indomitable market. Beating the system is every trader’s ultimate goal. But not even pros manage to stay on the cutting edge for very long. Those looking for a safe bet won’t aim to change the game with a handful of individual shares right off the bat. Even if you are looking to make conservative investments, reaping dividends is still a matter of hitting on the right markets and investment products.
Rule 8: The perfect strategy. Doesn’t exist. But the smart investor will come up with a strategy just the same. To minimize risk, this strategy should allocate assets over different categories of investments. If after covering all of the important bases, your portfolio still leaves you with the financial room to play the stock market, all the better for you.
Rule 9: The high-risk adrenaline factor. Long-term conservative investing involves a lot less risk and is usually more sensible than actively trading on the stock market. But it’s also a lot less interesting. Nobody can hold you back from taking the trading floor by storm like they do in the movies, if you really feel like it. Just don’t be completely surprised if your fun ends in financial disaster. With that in mind, if your risky playtime does actually end in profit, you’ll have all the more reason to celebrate.
Your moneyland.ch team