Learn trading and investing will show you how to make money in stocks.
The fat cats in the City of London and the wolves of Wall Street have done a pretty good job in convincing us that we need their expertise if we are to succeed when investing in the stock market. This is because nobody actually taught us how to trade or invest – so we know little about it and we trust our savings to so called experts – the fund managers!
The fund managers try to inspire confidence and expertise, and a perceived good return but the reality is they cost more, make you less and do not offer more security. But the newspapers are full of adverts advising us to invest in this and that fund, convincing us to depart with hard earned cash just so that they can claim their management fees.
The reality is, by learning the basics of the stock market and a few simple strategies, most people begin to make confident financial decisions for themselves and achieve better returns.
IS IT POSSIBLE TO MAKE MONEY IN STOCKS AND BEAT THE FUND MANAGERS?
Yes it is, even though they may be able to employ the top economics graduates and use the latest piece of research. They are constrained much more so than the independent trader and investor. Because fund managers are investing other peoples money they are rightly governed by rules and regulations as to what they can and can’t do with their client’s money.
Let’s consider an example – imagine a fund called ‘South American Growth Technologies Fund’.
Sounds impressive and you invest £5000 and hope for the best. After all they are experts and have a nice glossy brochure and expensive looking website.
You look at the value of your fund each month and after six months it is obvious that not much is happening in the South American Growth Technologies Fund.
The fund manager is aware of this and he hears that the South American oil and gas sector is doing very well. But he can’t switch funds because his fund is ‘technology’ not oil and gas!
So can the fund manager look north to the good old USA to invest in their booming technology sector – no because the brochure said the fund is South America companies only.
We, as independent traders are not constrained by brochures or rules and can invest in anything and any company we want to. It is our money we are investing and so are not regulated in this way.
Another problem with Managed Funds is that it can take weeks to get in and out of stock. Independent traders can be in and out in seconds.
Imagine a fund, like the Civil Service Pension fund, with billions to invest. They decide to make a new investment in say Coca Cola. Because the order to invest is so large it may take them several days before the entire order to buy is filled, but the market is aware of the very large orders coming so the price of the stock may well rise. The fund manager is faced with the dilemma of buying at a higher price or waiting to see if the price drops. It may take several weeks before he is fully positioned.
Independent traders have no such problems and again we can be in the market in seconds.We don’t have any of these worries. Our £100 or £1000 or even £100,000 isn’t going to be a problem at all. There will always be enough sellers in the market for us to buy (this is called market liquidity) what we are after, ensuring that we always get the price we want and not a penny more! And this happens in seconds, not days or weeks.
The third reason is that fund managers have to invest even if the markets are very uncertain and volatile, and most sensible people would sit on the side lines and not invest at least until the market resumes some sense of order. But fund managers do not get fired if the market falls they will just say give it time – be patient and the market will recover its price . However they do get fired if the market goes up (on a bull run) and they are not fully invested. Therefore fund managers invest even when its best to remain in cash.
Investing is what fund managers do, you send your money and they invest it – no good complaining afterwards.
The forth reason is that most fund managers can’t make money in bear markets i.e. when the share price falls. When the share price falls all they can do is buy more shares and hope that the price will recover.
Independent traders face no such constraint and can short the market i.e. profit when the share price falls.
So take heart that you really do have a great chance of making money in stocks and let’s get on with it.
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