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Analysis & Learning

How to be a successful investor?

January 28, 2021

I have been an investor for a very long time. I think I was 11 when I bought my first shares back in the days when the TV screen in your living room was the size of the latest iPhone screen. I have noticed that people unfamiliar with the stock market regard it as something deeply mysterious, the realm of so-called expects, a treacherous world beyond the ken of ordinary folk.

Not only is this nonsense but stock market ‘experts’, as with experts in so many fields, need to be treated with great caution, not least because it is so rare to find the experts in agreement and when they are they are invariably wrong. I literally pay zero attention to experts. I know what I know and equally important, I know what I don’t know, like where the market is going tomorrow. I have absolutely no idea.

What you need to succeed as an investor is not expertise, at least not a whole library full of it but common sense. Many investors do two things wrong. First, they try too hard and end up with what one perceptive observer has called ‘analysis paralysis’. There are so many variables out there. If you try to take them all into account your brain overheats and it is hard to decide anything.

Second, they try to achieve the impossible. There is a famous breed of speculator out there called a day trader. In competition not only with thousands, maybe millions of other day traders but with algorithms being crunched by hedge fund managers on their super computers they want to buy at the bottom, sell at the top and do it all in a 24 hour period.

Good luck with that, say I. If you can do it successfully without committing fraud you are very special, so special that I have yet to meet such a person. There is a reason why 75pc of investors on IG lose money and the reason is that they try to be day traders.

I remember explaining once to a would-be subscriber what I did. He listened for a bit and then said that was all very well but he wanted to make money quickly. I told him that in that case I was not his man and my service was not for him. Although, curiously enough, I have noticed that a patient approach to investing can often produce surprisingly rapid returns. The mistake is to set out to achieve quick returns; that almost never works.

I am not a day trader but I do invest on IG. I even use leverage and buy things like bitcoin but I don’t lose money and I don’t try to make money quickly. I invest on IG just as I would if I wasn’t using IG and I wasn’t buying CFDs. They are all shares to me, tiny bits of a company in which I am becoming a part owner and I buy and hold, managing my portfolio in exactly the way I advise my subscribers to do.

Except that for many of them I appreciate that leverage is too stressful and they mostly buy shares rather than CFDs, which you can also do on IG, with ISAs, SIPPs or whatever. I like taking risks and get bored if I don’t so I am very much a foot to the floor kind of investor, which doesn’t always end happily but overall I do well.

I don’t get paid by IG but we have to use some platform to buy and sell shares and I find they work very well. I even appreciate their ruthless approach to margin trading. If you get too deep in the red they sell you out. They don’t do fractional investing, where you can buy a fraction of pricy shares like Amazon so if you want to do that you may need to look around. I don’t need fractional investing because my minimum investment is big enough for high-priced shares.

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