The Rise of the DIY Investor
In an era of “easy money” and social media gurus, distinguishing between true investing and dangerous speculation has never been more important.
A Lesson from History
Legend has it that JP Morgan offloaded his stocks just days before the 1929 crash after his shoeshine attendant asked for stock tips. The lesson? When everyone is rushing into the market lured by the promise of quick returns, the risk of a “bubble” is at its highest.
“Nobody knows for sure when the current market rally will fizzle out, but it is clear many DIY investors who bought shares near the peak will suffer capital losses.”
Building a Resilient Portfolio
Ignore the “instant gurus.” Follow personalities with long-term track records of success through multiple cycles.
Don’t chase 200% returns in a bull market. Aiming for 15-20% per annum over 15 years is the true mark of a pro.
Actually read the financial statements. If you can’t value the asset, you are following the herd, not investing.
If your portfolio loses 50%, you need a 100% gain just to get back to zero. Pay a price that provides a margin of safety.
Holding positions for less than six months is trading or speculating. True investing requires patience and time.
Balance your local vs. offshore exposure and mix your asset classes to withstand geographical volatility.
The Golden Rule of “Hot Tips”
If you want to gamble on a new cryptocurrency or a trendy stock, do so only with money you are comfortable losing. Don’t let a single speculative bet set your entire retirement plan back by years.
“Great returns come to those who wait.”
Need a professional sounding board for your DIY strategy?
Theoniel McDonald CFP®
Managing Director of Wealth Associates Central & Vice President of the Financial Intermediary Association (FIA).
