So You’ve Decided to Become an ‘Investor’

So You’ve Decided to Become an ‘Investor’
Witthaya Prasongsin/Getty Images

Online, you’ll find investment sites like Robinhood, M1, and Betterment. (A simple search will yield articles that rate these sites on their pluses and minuses, which depend on the user.) Some sites provide automated help with predetermined portfolios selected based on age and objective. Others can be used as trading platforms and you can buy and sell on a whim.

 

The platforms themselves aren’t problematic; however, I care about what a novice investor does on the platform.

 

[RELATED: Investments in a Pandemic: The Lay of the Land]

 

Actively trading and using complex strategies such as options is a loser’s game. Professional money managers rarely win this way. Plenty of research and data back this up. People who sell secret trading strategies make their living by selling to the naive. As Warren Buffett said, “Risk comes from not knowing what you are doing.”

 

Time is the primary element in wealth building. Discipline and patience are close seconds.

 

[RELATED: Tips for Your Investment Portfolio in the Coronavirus Economy]

 

By its very nature, trading as a strategy is not based on time or patience. Trading could require discipline, but novices don’t trade with discipline; they are in it for excitement and thinking they will strike it rich.

 

Trading wastes valuable time and money. Instead, take the time to understand the power of time and compounding. Learn about “averaging down” and how to use portfolio allocation by holding mutual funds or Exchange Traded Funds (ETFs) to accumulate wealth. Maintain your allocation and objective through rebalancing.

 

Join MOAA Today 

Not a member of MOAA? Premium and Life members can consult our financial staff for education and consumer advice.

 

Already a MOAA member? MOAA has more than 400 chapters around the country. Get involved in your community by finding the one closest to you and joining today! 

 

Join Today Join a Chapter

Related Content

About the Author

Lt. Col. Shane Ostrom, USAF (Ret), CFP®
Lt. Col. Shane Ostrom, USAF (Ret), CFP®

Ostrom retired from the Air Force in 2000 and joined the MOAA team in 2006. His responsibilities include researching and answering member inquiries regarding military benefits, health care, survivor issues, and financial concerns.