The Challenges of Investing in a Modern World – Key Points to Note
The article discusses some key points on the specific challenges investors face when trying to invest during modern times.
The pandemic situation coupled with the recent price volatility has created a period of rapid change within the investment management industry. With the market volatility due to coronavirus, there is unpredictability in the air. The growing market volatility has significantly contributed to additional regulatory augmentation, fee pressures, margin compression, and changing investor preferences and customer expectations. But despite that, there are some glowing examples of stocks that simply rise above the uncertainties, which may be beneficial from a long-term investing perspective. Trading platforms that support momentum trading are very active during this period of unpredictable volatility. Learning to invest is an important part of any comprehensive financial plan. In fact, wise investments are a byproduct of knowledge. The more a person learns about investing, the wiser will be his/her investment decisions.
Currently, the investment landscape has vastly transformed in many aspects. Many people are quite reluctant to invest - either because they think it’s risky or because they don’t understand it. While the benefits are plentiful for those who can approach investing with a thorough, strategic plan, there are challenges that even the most prepared investor must seek to overcome. With ample research, planning and a strong financial plan, the challenges of investing can be conquered without fear. Here discussed are some of the unique challenges that modern investors face –
Information overload – As an investor, how do you find the good resources in the crowd? One of the most complex challenges that modern investors face is the sheer speed and volume of information. Earlier, concrete data or information about publicly-traded companies was hard to obtain outside of the annual and quarterly reports. The Wall Street journal and a limited number of other finance-related publications attempted to collect trading news and disseminate it. However, with changing investment landscape, many people looking to get involved in online stock trading Google around a bit to analyze the basics. Even when having access to a handful of quality information, people still get confused by the sheer amount of inaccurate, seemingly complex and even contradictory advice or suggestions found online. In fact, access to an incredible volume of information – right from the daily price fluctuations in the stock, to announcements and posts on dedicated message boards - can at times push an investor towards the edge by hyping an investment that isn't necessarily the best fit. However, with time, many investors have learned to filter out information and create a select pool of reliable sources that correctly match their individual investment goals.
The reactionary market – Even when having a good handle on quality information, investors can still get burned when inaccurate information or basic uncertainty hits the market. Inaccuracies can be in the form of honest mistakes, malicious rumors, or even financial fraud on the part of companies. Market reactions have always been extreme. The ever more global reach of information has given investors more reasons to overreact. In fact, it doesn’t take a great leap of imagination to see good or bad consequences with every headline that pops up in the feed.
Unknown risks – Generally, new investors may not have adequate knowledge about the hidden risks in many seemingly simple investment strategies. This in turn can cause their specific investment portfolios to take large hits early in the process. Staying informed about all the possible risks and uncertainties of trading can help combat this pitfall. Investors need to be familiar with the risks involved with margin, leverage, options, futures, etc. before considering them as an investment option.
Limited capital - Having limited amount of capital to invest is another common challenge that investors face. This only increases when certain financial instruments are too expensive. However, these issues can be easily solved by investing in “partial shares” that allow people to invest in equity at a lower price.
Over-diversification – This is a common self-inflicted challenge. Many new investors have a common habit of wanting to invest a bit in everything to shield themselves from risk possibilities. However, over-diversification can significantly stunt their portfolio’s growth. The best strategy is to always pick 2-3 options to invest the majority of your portfolio in.
Bad timing – In some cases, new investors simply go into the market right before a serious financial downfall – which causes them to lose money even before gaining any amount. But, this risk can easily be mitigated by dollar cost averaging - a strategy where people can invest into the market bit by bit and over a long period to lessen larger vacillations in the value in your portfolio.
The role of advertising – Investments and advertising has been both a boon and bane to investors. In one aspect, advertising helps familiarize investors with a wider range of investment options available. Beyond stocks and bonds, a modern investor needs to be more aware about other unique available investments like - mutual funds, index funds, ETFs, and probably options and mortgage-backed securities as well.
The reactionary market – Even when having a good handle on quality information, investors can still get burned when inaccurate information or basic uncertainty hits the market. Inaccuracies can be in the form of honest mistakes, malicious rumors, or even financial fraud on the part of companies. Market reactions have always been extreme. The ever more global reach of information has given investors more reasons to overreact. In fact, it doesn’t take a great leap of imagination to see good or bad consequences with every headline that pops up in the feed.
Unknown risks – Generally, new investors may not have adequate knowledge about the hidden risks in many seemingly simple investment strategies. This in turn can cause their specific investment portfolios to take large hits early in the process. Staying informed about all the possible risks and uncertainties of trading can help combat this pitfall. Investors need to be familiar with the risks involved with margin, leverage, options, futures, etc. before considering them as an investment option.
Limited capital - Having limited amount of capital to invest is another common challenge that investors face. This only increases when certain financial instruments are too expensive. However, these issues can be easily solved by investing in “partial shares” that allow people to invest in equity at a lower price.
Over-diversification – This is a common self-inflicted challenge. Many new investors have a common habit of wanting to invest a bit in everything to shield themselves from risk possibilities. However, over-diversification can significantly stunt their portfolio’s growth. The best strategy is to always pick 2-3 options to invest the majority of your portfolio in.
Bad timing – In some cases, new investors simply go into the market right before a serious financial downfall – which causes them to lose money even before gaining any amount. But, this risk can easily be mitigated by dollar cost averaging - a strategy where people can invest into the market bit by bit and over a long period to lessen larger vacillations in the value in your portfolio.
The role of advertising – Investments and advertising has been both a boon and bane to investors. In one aspect, advertising helps familiarize investors with a wider range of investment options available. Beyond stocks and bonds, a modern investor needs to be more aware about other unique available investments like - mutual funds, index funds, ETFs, and probably options and mortgage-backed securities as well.
While investing alone is a challenging game, what happens when the game is even for a longer term? The challenge for many investors lies in balancing their investment goals and taking in the right amount of information and turning it into action. To understand how much you must allocate to which investment vehicle, you need to learn how to build an ideal investment portfolio. The target should be to build a portfolio which not only remains safe but must also give enough returns. With an expert view of the markets, there is a stronger sense of direction investors can adopt that helps them look beyond the chaotic headlines and news reports. Taking advantage of the most of advanced online trading platforms offering direct market access is an important strategy.
