Every investor should be able to explain to another person why he is investing in a particular stock or Etf. There are two reasons for this: the other person can point out any errors in your reasoning, but perhaps more importantly, by saying out loud why you are doing something, you can double-check whether you are convinced.
Clearly, ‘they said this on TV’ or ‘my neighbor invests in this too’ are not convincing reasons to invest money in something. Your clear vision of a sector becoming important is a good starting point. And if you are aware of a company’s long-term plan, the various ratios, and the order book, I think you are on the right track.
Besides explaining why you choose to invest in a specific share, I think someone should also be able to explain how you do this.
It makes a big difference at which point you enter a stock. You can do that directly via the stock or perhaps via a derivative. Alternatively, you may have placed a stop-loss or a take-profit order. I don’t know many investors who unconditionally put their money in a particular company or sector, regardless of price developments and key figures.
If you are thoroughly familiar with the business, the market position, etc., and convinced that sooner or later, the value will go from 10 euros to 30 euros, possibly stopping at 5 euros.
For an ‘average investor,’ I think it is more beneficial to consider the entry points, for example, by buying a position in stages. Of course, an investor should always have confidence in the underlying asset. However, your portfolio makes quite a difference if you open your entire position at 20 or start at 15. Additional buying at a lower price started at 12 on average. In 2022, however, such ways have proved to be successful again. It might also have been that after the first purchase on 15, you did not gain any shares when the prices were only rising – you have to be aware of that.
If you can explain well how you make your investment decisions AND indicate which prices you are prepared to buy and sell later on. Then I believe you are doing well.
The information in this article should not be interpreted as individual investment advice. Although Hugo compiles and maintains these pages from reliable sources, Hugo cannot guarantee that the information is accurate, complete and up-to-date. Any information used from this article without prior verification or advice, is at your own risk. We advise that you only invest in products that fit your knowledge and experience and do not invest in financial instruments where you do not understand the risks.
