In the eyes of many novice investors, investing is equivalent to ‘buying stocks’. But that is too one-sided a picture, there are simpler alternatives. We show why buying individual shares is the wrong choice for many investors and what good alternatives are.
What it takes to buy stocks
Selecting stocks requires a lot of analysis and a rational approach. Investment analysts do nothing more than screen companies on a daily basis using objective measures, models and analyses. The average private person cannot compete with this. He lacks expertise, discipline and often time.
Partly because of this, individuals who buy shares quickly make the following mistakes:
Acting on intuition rather than facts: “I feel like this company will bounce back.” However, the human mind is not capable of gathering and processing all the information relevant to the success of an enterprise. Not even on a subconscious level.
Just take a few facts into consideration: “An excellent price-earnings ratio and pay dividend every year. I dare to buy those shares.” There are often so many more facts that can reveal something different or contradictory.
Based on the tips of (so-called) experts: “If he says it, it must be right.” However, selecting winning stocks proves difficult in practice, even for professional investors. The instacart stock ticker is found online. Good returns achieved in the past therefore offer no certainty. Wrong analyzes due to human shortcomings: “I now know how to make money with shares. I have a nose for it.” People make all kinds of errors of judgment when investing, which lead to unnecessary risks and losses.
Relying on the user value of a product or service: “I like to use this product, and many do with me, so an investment in this company will also be fine”. The fact that a product or service works well or can be found everywhere does not automatically mean that the company in question also creates shareholder value.
How to invest successfully?
Fortunately, you don’t always have to buy shares directly to invest. However, it is important that you apply the basic principles of investing, with which you have the greatest chance of a positive return. For example, you must spread your assets over different (types of) investments and invest over a longer term. Statistically, this ensures that the chance of a positive return is the greatest.
Buying alternatives to stocks
Fortunately, there are simple alternatives to buying shares yourself, where the basic principles for successful investing are easy to apply:
With the help of these mutual funds you can build a well-diversified portfolio in an instant, limiting your risk and increasing opportunities for capital growth. You do have to invest some time in comparing and selecting investment funds before you can buy them.
An advantage is that you do not select specific investments yourself, that is done by the fund manager. So you generally need less investment knowledge than when you trade in shares. Moreover, it is much less time consuming.
There are online total packages for those who find mixed funds too complicated. Although the costs of this service are slightly higher than those of investment funds, investing is reduced to answering a few questions and depositing money. Like joining a sports club. So very simple.