For humans, the world is full of problems and all of these problems require some kind of a solution. The good news is that we as a species already accumulated a vast range of knowledge about most of our every-day problems, and how to solve them.
The bad news is that humans are not only slow learners with inconsistent memory functions. We are also easy to be influenced by others, and unfortunately, these “others” don’t always have our best interests at heart.
Let’s take a look at the concept of investing. As I wrote in my to date most popular article “Nobody wants to get rich slowly“, investing in the stock market is a fairly easy and straightforward process. The modern tools that we have at our disposal, namely easy access to information via the internet, access to the stock market, and to the right products (like ETFs), can help everybody becoming a successful investor.
But of course, everything simple can also be made more complicated. The world of investors today is not only about buying and selling stocks and ETFs, but the financial industry has added countless additional products to the mix. From FOREX trading to CFDs, short-selling, and BitCoins. Things can get pretty complicated.
Keeping things simple
I invest in single stocks and in ETFs only. I don’t trade with foreign currencies, I don’t put bets on the futures market, I don’t purchase digital coins, and I don’t engage in short-selling. Am I losing some opportunities along the way? Possibly. Does it bother me? Not a bit.
I like to keep things simple, and investing per se is a simple process. I do my research and then I purchase shares of a company that I believe has a bright future ahead. If I can’t find enough information about a specific company or can’t focus on one, I will look for an ETF that might cover that specific market group, and I invest in that ETF. That’s it.
It’s pretty rare that I sell any stock unless it made me a significant profit. Even then, I won’t sell the whole position, but probably only some part to free up cash and to buy the next stock or ETF.
My target is to grow my portfolio and to build up my stream of passive income via dividends. Ultimately I want to retire with sufficient passive income to not care about any government money or support from others. I want to be financially free and independent, and I still have plenty of years ahead of me to get there. History taught us that investing in stocks is the single easiest, most reliable process to reach this target.
Impatience and greed
But of course, there are some obstacles along the way, and the biggest ones are our own emotions, namely the feelings of impatience and greed.
Most companies don’t grow overnight, and the perspective of waiting for 2, 3, 5, or even 10 years for a breakthrough and the ultimate success is not easy for everyone. It can feel tempting to try to speed up the process with some CFDs and bets on the future, to hedge against losses with some short-selling options, or to divert some funds into bitcoins with the hope for a quick boost to your net-value.
And yes, there definitely are opportunities that I might be missing out on. But for me, it’s just not worth the headache, mainly because the trading frame is too short and the risk-reward ratio is not appealing enough for me.
I don’t want to trade stocks daily or even weekly. I don’t want to be forced to follow every single news-flash to be able to quickly react in a fast-paced environment. And I don’t believe in every single new trend is being said to become the next Trillion-$ market. So why would I give myself all these troubles, especially while knowing well that the simple investor approach that I am following now is historically also the most reliable one?
There is also the fact that while most of all these other opportunities in the financial industry offer viable options to make profits, they often also offer the possibility to lose your hard-earned money even beyond the originally invested amount.
Last but not least I am also perfectly aware that the main reason for the financial industry to push and empower a fast-paced environment is because they earn more in commissions and trade fees if their customers are more active.
Do your thing, but keep it simple and keep your emotions in check
I am not saying that people shouldn’t try other investments or explore other potential opportunities in the financial market on their own. Everyone can find a different path to success, and some products and concepts will work better for some than for others.
But no matter what you plan to do, learn from others who walked that path successfully, try to keep things as simple as it gets, and keep your emotions in check.