What if I told you the people around you either make you succeed on the investment markets or make sure you will lose your money. Would you believe me?
The people we deal with on a daily basis at our workplace, spare time or social media define our success, and the people whose books we read and whose videos we watch affect how we fare on the markets.
Who are you listening to right now?
Unfortunately, most of us listen to investment advice from either family members, relatives, hobby buddies or partners while making decisions. If any of these advisors are not professionals in the field, it’s worth reconsidering who to listen to me when making important investment decisions.
How does our vicinity affect us?
Sometimes your investment strategy may, according to someone in your vicinity, be conflicting with opinions presented by someone on TV. At times your investment strategy may be completely foreign to your family, so it’s classified as dangerous gambling. Other times your close ones may redefine your strategy, since you’ve suddenly wound up under the influence of your partner and owe her a trip abroad. When you let someone else choose your investment strategy, you’ve actually made your long-term investment a short one – if it can even be counted as yours any longer.
An unfortunately common pattern is that your inner circle at some point asks you to open your whole investment portfolio for their analysis. Your decisions may be judged if they differ from your reviewer’s familiar ones. After this an unprofessional mastermind will tell you just how to place your money better. These examples may sound amusing, but they are regrettably real.
Does that sound familiar?
I have, for instance, heard that cryptocurrencies should not be touched since a drama series actor lost all his money in poker… or that bitcoin is a pyramid scheme just because OneCoin was, or that it should be avoided because the news said its extremely volatile. Some folks are certain only stocks should be touched, since they give dividents. And that savings accounts are a way to save with no word of inflation and lost value…
Unfortunately all these sources are tend to be experienced actors in the financial sector. A combining trait is that they have all read or heard about it somewhere. But they hadn’t yet tested the theories presented as true. Apparently they didn’t need to.
So, is it worth telling all the self-proclaimed experts around you what your portfolio contains? The free advice you may receive can at worst keep you poor forever. But before you start a big purge of your inner circle and a massive witch-hunt of relatives, maybe you should start following some investor, trader or actor in the field. Daily. Several months and years. After that you may know more, and how to act better.
Who should we listen to?
Many stock market investors traditionally start by following Warren Buffet, Ray Dalio or by reading some other expert’s books. Another option is to follow the social media or Youtube accounts of investors. Among crypto trading some of the most followed analysts include Peter L. Brandt and Tuur Demeester. In Coinmotion technical analyses are written by Toni Kosonen.
Often a simple 5-10 minute daily following can be enough to acquire a lasting routine. So find your own daily rhythm that you can follow.
What’s more important than whom to follow is how you develop yourself as an investor. You can increase your knowledge for instance with the following model.
- Start by following an investor or trader of your choice.
- Mark down every word and sentence from their texts or videos you didn’t understand and find out what they mean. This way you will understand what is talked about.
- Repeat what is advised exactly the same way with paper trading, meaning doing trades on paper without investing real money. This way you can test if the advise actually works in your case
- Try investing a small amount of capital to see if you can do it with real money.
- Monitor and measure the results.
- Don’t judge any of your mentors or yourself. Blaming others is a problem for amateurs, while masters know how to learn from mistakes.
This can sound like a very cautious way to proceed, but why lose your money if you can test how it works without risk. You learn by doing, not just by reading unless you act upon what you’ve read. Doing forms a routine which leads to a real understanding of the market.
Learn to know yourself and your situation
Now that you’ve spent months or years learning investing, you’ve probably noticed how well the advice of your mentors works in practice. At this point you’ve probably noticed that some of the given advice simple doesn’t work with you. Some tips in turn fit big investors better than small ones. And some are more related to trading, while you’re more of a buy-and-hold type of long-term investor. Still, remember not to judge your mentors.
Therefore it’s good to follow an investor or trader whose guidance better fits your own situation. If you’re for instance a student with lots of spare time, you can use your time more freely to learn investing. This enables both trading and investing, but money may be a scarcer resource. But time is available, so use it.
If you in turn have a family, a job and little spare time, you may be limited to 10-20 minutes of learning per day. This is still enough time, as long as you do it every day. In this situation you may have more money at the expense of time, so monthly saving might fit your situation better than stressful and time-consuming trading.
If on the other hand you’ve already gathered yourself a nice nest egg, then your situation is a bit different. You may have more time for investing, since you now have the possibility to employ others to do routine measures in your business. But now more is also expected of you as an investor, your organizing skills are tested and you get calls and “good tips” all around, which requires good decision-making skills. If you by now haven’t learned how to make investment decisions on the markets, it’s a good time to start.
At this point especially the meaning of good advisors is emphasized, but now you need to choose your advisors according to the situation. If you want fast profits with low risk, you’ll unfortunately have to choose between them since no one can offer you both. In this situation it might be better to first read a few books about investing before seeking an advisor to make you a top investor with minimal risk. So even at this point you can’t hire good advisors without good decision-making skills.
Learn to know yourself as an investor
If you started out as a complete novice listening to other novices giving ”free advice” with drama series as references, luckily you stopped listening. And you no longer opened up your portfolio to be viewed by your inner circle, or changed your strategy to please them. And you no longer care about listening to people who don’t practically study things.
Instead you have now read 20 books about investing. You’ve tested different theories from paper to practice every day for months or even years. After that you’ve gone from small sums to bigger ones gradually over time and noticed what really works for you.
Now you may already much better comprehend what kind of investor you really are. What are your strengths and weaknesses. What is possible for you at this very moment. How the markets work. And whose advice fits your life situation the best right now.
When you learn to know yourself better you can find the best mentors for investing to help you further along your path. You are likely to also find your own investing style, which enables profits on the markets also in the future.
So, who are you going to listen to from now on? Find out and already start today.
Hopefully these tips were helpful!
The writer is a board member of cryptocurrency organization Konsensus Ry and has years of experience in different investment fields, including cryptocurrencies.