Throw Your Money In and Ignore?
How the average investor interacts with the market is only as a buyer. They might take a few looks every month to see how things are doing, or they pay attention when there is tons of news happening. You might also be watching the insider stocks to buy by closely monitoring the publicly-held company you are invested in. Set and forget is viable, but it is not optimal. Actually paying attention to the underlying companies and what is going on is a way to get an information advantage to make informed investment decisions.
When Buy and Hold Goes Wrong
Buy and hold is most people’s strategy, and over the long run, it often works well. It works best when a portfolio is mostly made of solid stocks to buy with good footing. When it comes to higher-risk investments and chasing the next big thing, it is not as good. Knowing what is going on with the companies invested in is always a good thing.
How The Smart Money Invests
The ‘smart money’ invests a lot different than the average person. Typically, the ‘smart money’ has an information and execution advantage. Telling a reader about what they do not have isn’t useful, so let’s talk about ‘smart money’ investment habits that anyone can use, implement, and how it ties into watching publicly traded companies.
(1) Know When to Invest Your Money
Knowing when to invest your money is vital. Unlike the ‘smart money’ dumb money often suggests that you can’t time the market and that the investors are at the whims of the market. There is some truth value in these statements, but it isn’t universal and there are countless exceptions. When to invest your money? The smart investor buys when they can buy into value, while dumb money buys along with the hype train, often at all-time highs. Smart money invests when they have fundamental and technical analysis reasons to do so.
(2) Know How to Invest Your Money
When and how are not the same thing, but it is easy to get confused. How is all about technical ways to get money into the market. Dollar-cost average is an easy hands-off way to build a position in the market by having schedules regular stock purchases, often monthly or quarterly. This fights chasing the market or letting the hype train control when investments are made. Another how is buying before and around huge technical and fundamental triggers such as chart patterns, price breaks, and news. All of these can also be used to stay out of the market when things are turbulent.
(3) Know the Fundamentals
The companies that you invest in have a bigger picture, and macro events will determine how much your investments are worth at any time. Do you know when earnings reports happen, do you know what is happening when management, do you know the big moves, strategies, and goals of the companies you invest in? This type of investment is called fundamental analysis.
(4) Know the Technicals
One easy way to watch your publicly traded stocks is to watch and know the technicals. What are the technicals? The technicals are focusing on what is happening on the financial charts for your investments. Knowing the bigger trend, medium structure, and weekly ebb and flow of your investments keeps you well aware of the market. Perhaps a good strategy is to watch the weekly chart, monthly, and yearly chart. Knowing this technical structure will alert you when you might want to buy more or buy a little less if your strategy is to dollar cost average.
The Informed Investor
Watching your investments with a hawkeye is one way to be an informed investor. This means that a person pays attention to major news, earnings, and changes in their investment. The more you know about your investments, the better choices you are able to make. An informed investor is a ready investor, quick and nimble.
Finding Balance
It is so easy to understand why people want to buy (invest) and forget. In many cases, that is just fine, but in several other cases, it is the wrong strategy to take. The best practice is to watch carefully your more volatile stocks because they are more likely to be subject to extreme moves.
With your more traditional stocks and shares, think long-term solid brick and mortar companies, as well as foundational technology companies like Google and Amazon, it is okay to invest and forget. The reason why we watch the more volatile investments carefully is to preserve our profits and to be ahead of major sell-offs.
