In our years of experience, we often see people try to hit the ground running when they start out investing. But, just like a child learning to move for themselves, we all need to start with the basics and move from crawling to walking, and then to running. With that, here are our thoughts on developing your investment strategy over time to ensure that you make the most out of your money.
Why progress is pivotal
If you follow any sort of trading accounts on social media, you may have seen some self-appointed ‘gurus’ promote trading instruments like Forex or CFDs. These strategies that promote trading with leverage and less capital are attractive and lure in many new investors, however, these places are not for the faint of heart.
This could be an unpopular opinion, but Andrew Baxter says you need to start with the basics before you gearing up to the more advanced places or with more exotic strategies.
Trying to run before you can even crawl will most likely end in disaster.
Learning to crawl
As with most things, the first and best place to start is education.
Education.
Trying your luck and simply ‘opening a trading account’ before taking the time to learn and build your knowledge first almost always ends with you losing your money.
We all took lessons to learn how to drive, right? So why would we skip that part of the process when it comes to investing? It may slow move, but manage, and learn how to read charts, and building familiarity with market movements will set you up for the long haul.
Don’t try and play with fire – get some lessons before you start driving on your own.
Talking your first steps
Once you’ve got crawling under control by demonstrating an understanding and ability to work with slow moving assets – I.e. stocks – then you can start learning some new strategies.
Andrew suggests looking into the derivatives market, which can be a good place to trade in conjunction with the shares you already own, allowing you to manage risk and also generate income.
Cashflow on Demand is a strategy that Andrew has applied and taught to thousands of people for 30 or so years. The focus of this strategy is to generate immediate and up-front cash flow from the stock market using Call Options.
These derivative instruments are a little more complicated, however, as you move from crawling to walking, harnessing their power could help you progress in your investment journey.
Running with the ball in hand
Now that you have master stocks and a basic level of derivatives, it’s time to start broaden your horizon on things that are a little more exotic – spread trade, naked sell, speculation, and leverage instruments.
If you haven’t a concept of what those mean, then it’s a pretty good indication that they’re not the place to start at, and require a specific skill set and base knowledge to become successful.
Trading is like a bag of golf clubs – you’re going to need a different club for each kind of hole on the green as not one size fits all.
By learning a myriad of new strategies through a program like Andrews Advanced Options Program, for example, you can develop the power to capitalise on special situations in the market, and have a few more tricks up your sleeve.
At this point of the game, tightening your asset allocation to ensure you’re trading in accordance with your risk profile is pivotal.
Client case study
Meet Shane and David.
Shane is a lovely fellow who took the precautionary steps and stages we’ve just mentioned when he started trading. He’s a little more back-footed when it comes to investment decisions, and decided to take things slow so he understood every step in detail as he went along.
David is a successful business name, very driven, and more front-foot to make a decision. As the perennial over-achiever that he is, when trades and invests what David discovers, he wanted to rush through the stages and be at the run phase as soon as possible. But he quickly realises that if he wants to be successful at the zenith of trades, he needs to go back and learn the basics well.
You might be like Shane, or you might be like David, but at the end of the day, no matter how smart you are or how keen you are to learn, you need to follow a process and ensure you’re receiving the right guidance along the way.
If you’re wanting to get started on your investment journey, feel free to reach out to Andrew and his team at Australian Investment Education today!
To listen to the podcast episode, you can find us on Apple Podcasts, Google Podcasts and Spotify. Remember to subscribe wherever you listen to us, so you never miss an episode!
