As an investor, you have an asset; you also have an investment. That particular position or place where the investment or asset is being kept is known as a portfolio. What does a portfolio mean to you? A portfolio contains your investment and every other asset owned by you. And to build a portfolio, I am quite sure you know diversification and risk management is a crucial consideration when an investor is to create a portfolio. In a straightforward term, a portfolio is a description of an investor’s financial asset. By financial asset, we mean stock, bond, real estate and other securities; mutual funds are not excluded. In building a portfolio, there are things to always put into mind. This includes (1) Diversification (2) Risk management.
Diversification: the primary factor for an investor to be successful is to be diversified. It is necessary as an investor for you to invest your wealth in various companies and industries. By doing this, your portfolio’s performance is not going to be dependent on any particular asset. Let’s take, for example, as an investor, if you invest in only one stock, what happens when the stock tanks? Your portfolio will be significantly affected as well. But let’s say that you are diversified in your investing, your portfolio will always survive through the hard times in the stock market.
Risk Management: You have to be ready to accept investment losses whenever they come. You have to be prepared, financially, mentally and emotionally, for any loss. It would be best if you were ready to deal with market volatility. If you can manage risk well, you are not far away from the top. If you don’t have a long term investment goal, you should take less risk because there won’t be time for you to bounce back from market loss.
Waking up one early morning and investing in a stock market isn’t the solution to life-changing wealth. You will have to get to understand the industry or companies whose products and services the world makes use of daily. It would help if you had an understanding of how the global economy works. You will need experience of how things are trending and changing in our everyday lives. It would help if you also focused your attention on the right strategies to achieve successful results. What do you understand by core investment?
This is the strategic use of stocks or market indexes, especially when the indexes imitate the whole market or a significant part. What this is saying is that, when we say core investment, we are referring to the critical stocks used on a market that play a significant role in the stock market for over a long time. When you are a core investor, you will invest at a particular point in the market, and a core investor will also enter the stock market again to see if he can still get another position. Are you interested in capturing substantially large gains? The best thing to do is to become a stock core investor. There is a difference between an ordinary investor and a core investor. What an ordinary investor does is what is referred to as buy and hold. Investors buy and hang around the share in the market for a particular period. Now, the question is, what does it mean to invest around a core? Firstly, investment has to do with an investor buying a single stock and selling the same stock quickly to make a profit or gain. But the truth of the matter is that it is more profitable to make investment around a core position in the stock market. Let’s go into understanding what investing around a stock position means.
Are you investing around a core position?
When an investor takes a long time investing in shares and stocks in the market, they take a position around a core. Core investors do this to manage risk and diversify their portfolios by investing in stock at a different time. As a core investor, you can go ahead to hold an influential position for just a single stock. But to be a core investor, there is always a challenge of finding the right candidate. Whenever the price action at a particular time is of interest to you, you can take a position as quickly as possible. Core investors don’t wait around looking for an initial setup. It is easier for you to break through a certain level and wait around for the news. As your potential catalyst tends to develop, there will be an increase in your position size enough for you to sell some of your stocks. Try as much as possible to sell during this period. By so doing, your position will be reduced, and you will have your profit. Be flexible and smart in your investment.
To be successful in the stock market, you need to have an investment portfolio that will give you a stand in the market. That is more reason you will need to go beyond index funds and invest in Individual funds. By doing that, you will quickly earn a return from the market that can compound together with time. There is doubt that your portfolio needs a reliable core backup to give you a foot in the stock market.
When an investor uses a particular stock to speculate, it is known as speculative stock. This stock doesn’t show a sustainable business model. Anybody can wake up and choose to invest in stocks with the hope that things will turn out favourable, especially in the aspect of price. You can always make a profit, especially when you think a company’s stock is expensive or overpriced. You can invest and sell when the price has fallen. You will make a profit from there. Speculative Stock is full of uncertainties, it is of higher risk, and it is aggressive. The risk is worse when you invest in a speculative Stock with a company that does not have to enjoy the money. When investing in speculative Stock, limit the holdings to 30% of your total portfolio. Keep in mind to focus on the quality of investment.
When an investor invests in a company without first doing research, it is known as speculation. Speculative Stock can be worth the risk for the investors that like hitting it big. Speculative Stock depends mostly on how you can tolerate or handle risk when it occurs. But as a new investor in the stock market, speculative Stock may not be the way forward for you because it seems to be more about luck. But the joy is there is a variety of investment opportunities in the market. Choose your risk wisely and be ready to manage it.
Recommended books for further reading:
- The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits
- The Warren Buffett Way
- How to Day Trade for a Living: A Beginner’s Guide to Trading Tools and Tactics, Money Management, Discipline and Trading Psychology
- Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week
- Investing QuickStart Guide: The Simplified Beginner’s Guide to Successfully Navigating the Stock Market, Growing Your Wealth & Creating a Secure Financial Future
If you are looking to open an investment account, follow these links below:
- Passive income
- Silver & Gold coins
- Interactive Brokers
(‘68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.)