The market narrative has been anything but straightforward this year. With recent bank failures, an unfolding artificial intelligence (AI) revolution, retreating inflation, high interest rates, and lingering fears of an impending recession, the news cycle has been a non-stop rollercoaster ride of mixed signals.
For newcomers to investing, it may feel like baptism by fire. Heading toward the year's midpoint, equities are on a tear. The S&P 500 hit new highs, officially entering bull market territory on June 8 and exiting one of the longest bear markets – 248 trading days – in many decades.
For the uninitiated, this could be an exciting yet unnerving time to begin investing. The pandemic birthed a whole new category of retail investors. Of all investors in the American stock market in 2021, 15% had started investing for the first time in 2020, according to Charles Schwab.
Dubbed “Generation Investor,” this younger group of investors are more optimistic about market results than their older peers. They are also hungry to learn. One Schwab study claims 94% of this new grouping want access to information and tools to do their own research, while 90% want educational materials to improve their investing skills.
There is a broad range of tools new traders can use to equip themselves for success in their investing journey.
Reading is fundamental to building a strong foundation in investing. “Reading investing books can give investors an edge… they can learn about different investing strategies, market trends, and the importance of discipline and patience,” says Jorey Bernstein, Founder & CEO of Bernstein Investment Consultants.
The classics of investing literature concisely convey fundamental concepts and strategies that form the basis of sound investing. They offer valuable insights and perspectives from successful seasoned investors, helping beginners navigate the complexities of the markets. For instance, Charlie Munger's reading list, which features investing books but also biographies of great people and former presidents, can serve as inspiration.
“I recommend The Intelligent Investor by Benjamin Graham, One Up On Wall Street by Peter Lynch, and The Little Book of Common Sense Investing by John C. Bogle,” Bernstein adds.
Books facilitate continuous learning throughout their investing journey, increasing their chances of achieving long-term financial goals. Reading not only lays the foundations for beginners, it can also be a constant source of inspiration for seasoned investors. It allows traders to mentally try on a concept for size without having to stake anything in the market.
“When choosing books on investing, consider picking something up that challenges your current opinions. Confirmation bias can be a major pitfall for any investor,” Caleb Vering, Associate Wealth Advisor for Farnam Financial. “The Psychology of Money by Morgan Housel is a title I recommend to everyone.”
Join The Club
Investing may seem like a lonely pursuit, but it doesn't have to be. One of the best ways to accelerate the learning process can be by joining an online community.
Besides the large discussion forums on platforms like StockTwits and Reddit, many users seek out niche peer learning groups through specialized Discord servers. Some of the best stock trading Discord servers, such as BT Investing, R2R Trading, and Stock Dads Discord, serve as a knowledge-sharing hub for investing.
Some of these groups aim to simply be support groups, while others may follow a specific trade strategy crafted by a head investor who acts as the admin of the group.
“Stock discord servers can be helpful for traders to share ideas and insights with like-minded individuals,” says Bernstein. “However, it's essential to remember that not all information transmitted on these servers may be accurate or reliable. Doing your own research before making any investment decisions is always a good idea.”
Vering also warns of the risk in this space. “Discord servers and other mass group messaging servers like Telegram are littered with scams,” he says. “Remember: if it sounds too good to be true, it is. Always do your own research.”
Tools For The Job
Like any serious undertaking, investors require the right tools to do their job well. Some tools, such as robo advisors, leverage algorithms to provide automated personalized investment advice or directly manage portfolios for individuals. While others, like trade alerts, send real-time notifications when select stocks are within the target price range.
These are particularly sought out by swing traders who typically hold a position for around a week – longer than day traders, but shorter than buy-and-hold investors. Swing traders aim to profit from day-to-day price movements and, by the same token, are more exposed to gap risk.
This strategy has proven popular in recent years as it requires less capital upfront capital and moves at a slower pace than intense day trading. Swing traders typically pick large-cap stocks which are highly liquid. They use technical indicators to take positions on a stock's anticipated price movement over the coming days.
Some of the top alert services include Mindful Trader, Stock Dads, MetaStock, and Rule Breakers, with each having its own focus and go-to trade tactics. “Swing alert services can be helpful for short-term trades, but it's essential to research and analyze before making any investment decisions,” says Bernstein. “It's also important to remember that these services may not always be accurate and reliable.”
The Investing Journey
It is hard to overstate the importance of education and tools for investing success. The all-time greats of the art constantly remind us of this. “Of all the investments I ever made, buying Ben's (Benjamin Graham) book was the best (except for my purchase of two marriage licenses),” Warren Buffet said in 2013 of Benjamin Graham's The Intelligent Investor.
The investing journey can be beset by problems, from knowledge gaps to the interference of irrational emotions. Having the right resources does not necessarily guarantee results, but it gives people the best chance of success.
This article was produced and syndicated by Wealth of Geeks.