The stock market offers many opportunities for investors, but it also requires a lot of discipline, patience, and knowledge.
Individual investors are highly susceptible to panic sentiment and, therefore, often ignore non-panic narratives. This means that they tend to overreact to negative news and underreact to positive news, which leads to missed opportunities and unnecessary losses. I would advise individual investors to do their own research, diversify their portfolios, and avoid following the herd behavior.
Individual investors often neglect the advantage that they have by default - time.
Unlike institutional investors, who have to meet short-term performance targets and face constant pressure from clients and regulators, individual investors can afford to invest for the long term and benefit from the power of compounding.
I recommend retail investors adopt a dollar-cost averaging strategy, which involves investing a fixed amount of money at regular intervals, regardless of the market conditions. This way, they can reduce the impact of market volatility and lower their average cost per share.
In a bull market, many people think beating the index returns is easy, but this is not the case. Most investors end up underperforming the market, either because they chase after overvalued stocks, sell too early, or incur high fees and taxes. I would suggest individual investors use low-cost index funds or exchange-traded funds (ETFs) as the core of their portfolio and allocate a small portion of their capital to individual stocks they have thoroughly researched and believe in.
Individual investors always underestimate risk and make too many trades. This exposes them to unnecessary losses, emotional stress, and behavioral biases. I would recommend individual investors refrain from using the SELL button in the long-term perspective and limit their purchases of an issuer to an amount that does not exceed 5% of their investment deposit and never deviate from this rule. If they want to buy more shares of a specific company, they should deposit additional money to their brokerage account so that the increased position fits again into the 5% limit per issuer. This way, they can avoid concentration risk, overtrading, and regret aversion.
Don't make stupid mistakes.
Even if a regular interval investment strategy isn't right for you, that's no reason to do something stupid.
This is not a great example because this guy is not an individual investor but primarily an investment manager. Warren Buffett is legendary not because he makes brilliant trades but because, unlike other investment managers, he did not do silly things and showed so over a very long period.
— J.
https://t.me/dgtlcapital