‘Fortune favours the patient’: Investors offer sharemarket tips for beginners
Australians opened more than 230,000 new share trading accounts with Commonwealth Bank over the final six months of 2020.
The bank’s stockbroking arm, CommSec, processed $110 billion of share trades within that timeframe – exactly double the value processed during the same period in 2019.
Other banks also reported large numbers of new investors rushing on to their platforms during the pandemic.
All while amateur investors lost hundreds of millions of dollars attempting to time the market.
Throw in the recent GameStop saga and it seems like a good time to seek some advice.
Which is why The New Daily asked three finance and investing experts for their best tips for novice investors.
Scott Phillips, chief investment officer at The Motley Fool
“Keep your eyes on the horizon. None of us walk or drive dead straight. But we hardly notice it because we’re focused on where we’re going. Shares are volatile, hour by hour, day by day, and week by week. But the further you zoom out, the less scary it looks.
“Build a diversified portfolio. You have a 50 per cent chance of a fair coin landing on heads or tails. But if you only do it once, you’ll either get 100 per cent heads or 100 per cent tails. The more you flip – and the more you invest – the more likely you are to not be whipsawed by the results of any particular investment decision.
“Be the tortoise, not the hare. Don’t try to keep up with the Joneses. Don’t try to make a fortune overnight. Don’t chase the next big thing. Don’t speculate. Fortune doesn’t favour the brave: It favours the patient.”
Effie Zahos, editor-at-large at Canstar and former editor of Money Magazine
“The old saying, ‘It’s time in the market, not timing the market’, works well for most investors. The sooner you start investing, the more opportunity you have for growth, particularly with the help of compound interest. Vanguard historical data reveals that if you invested $10,000 in the broad Australian sharemarket in 1990, it may have turned into almost $130,000 over the past 30 years. It goes to show that investing a little now can add up to a lot later.
“Don’t put all your eggs in one basket. Diversifying your portfolio can help to offset any sharemarket dips.
“Don’t invest if you have other short-term financial goals. There is no guarantee that your shares will rise in value and that dividends will be paid. If you need your cash fast, or you are saving for a short-term goal, then shares may not necessarily be the right investment for you.”
Greg Yanco, executive leader of markets at the Australian Securities and Investments Commission (ASIC)
“Despite some recent gains, markets remain volatile. There is never any guarantee that past performance will be replicated, so don’t ever risk more than you might be willing to lose. Because you just might.
“Knowledge is not just power, but protection. This means knowing enough can help you avoid some dodgy investments. If you don’t understand what a company does, or its products, go find out first! Some investments (such as high-risk derivatives) are extremely complicated – difficult enough even for the professionals to deal in – so why would you think you can outsmart them?
“Do not just rely on claims in advertisements, on social media or in investment forums, or market rumours. You may not know who’s behind them, or what’s in it for them, but you should suspect the worst. Instead, seek advice from a financial adviser you trust – and make sure they are licensed.
“Know yourself – professional financial advisers are required to take into account your financial situation, objectives and needs. That’s good advice to apply to yourself.”