4 Steps to be a Great DIY Investor

It’s not too hard to be a successful investor. You need confidence, self-disciplinary, and effort to study, explore and develop yourself until you discover your own investment style, and all those practices will pave the way to create your own wealth. Here are 4 steps to prepare yourself to become a great DIY investor.

1. Build a Strong Financial Base

Investors start investing and later sell their assets after a market crash during economic recessions and finally lose their money. That behavior derives from 2 causes; scare and poor financial planning.

When the stock markets go down, investors may not have to sell stocks but if they have no choice, such as losing their job and don’t have enough savings or emergency funds, they can’t avoid selling their investments to get cash for a living.

Before you start being an investor and stay away from unexpected problems, you need some basic financial planning as follows.

  • Assessing your job security. Check whether your job is secure and related to the overall economic situation. Ask yourself; would an economic recession will affect your job?
  • Create multiple sources of income. Try to diversify your income in case you lose your job or earn less income. That will lower your chance to sell your asset investments when facing difficulties.
  • Own an emergency fund. Have cash savings to spend about 3 – 6 months before becoming an investor.

2. Consider Alternative Investments  

In case you want to invest in stocks or Mutual Funds, it’s recommended to study the detail in different sources, such as seminars, training, or consulting an investment advisor. Experts will provide suggestions, investment theory, and experience sharing from a wide variety of customers. Moreover, you should record investment statistics in each period to increase information, manage risk, and be a choice for your investment decision.     

You may also use “Robo-Advisor” which is quite popular now. It provides digital service advice based on algorithms or AI, together with investment experts to design and manage automated Mutual Fund ports for investors. Robo-Advisor is suitable for investors who focus on asset allocation determined by investment goal and period to gain expected returns according to their risk tolerance.


3. Make a Sound Judgment

As there are an array of asset investments, such as stock, Mutual Fund, bond, real estate, and gold. Make sure you choose a proper investment, good quality and appropriate price, or those who buy them from you, can resell them without losses. Or, while holding assets, you are able to create a return on dividends consistently.

Even though each asset has specific characteristics, they consist of 2 basic principles you should know before investing; 1. Analyze basic factors: so that you can examine factors that have an effect on those assets internally and externally. Consequently, you will be confident to choose assets with good factors. 2. Analyze other factors: They include economic climate, government policy, interest rate, unemployment, etc. to indicate good timing in order to gain proper value in trading those asset investments.

4. Learn to cope with fluctuation

DIY investors may make wrong decisions leading to poor investment returns because they make too many adjustments to their port. The Morningstar study finds that the average return on Mutual Fund invested over the past 10 years was about 7.05% per year. However, when studying from investors who invested in those funds, returns were found at 6.1% per year with a nearly 1% difference per year. The major reason is that investors adjust investment ports along the way because they are scared that stock markets will turn lower so they sell them out.

To relieve anxiety in order to avoid that situation, investors should study reliable investment information. Following trends may sometimes cause investors to fail to achieve expected returns. Thus, information is the most powerful energy when the market conditions are volatile.

Moreover, investors should study risk management. Whenever stock markets are unstable and investors have to sell assets out of investment port, it means the port holds assets that are riskier than the ratio and goal previously set. The solution is to manage the risk level of assets in the investment port by forecasting the most volatile period at the first stage.

When minimizing risk, investors may lose expected returns in the future. What’s it for? If the stock markets can’t avoid volatility, investors need to sell their assets during the worst times and bear the loss instead of gaining returns. Consequently, risk management is essential and it must begin with asset allocation to reduce loss when the market is unpredictable.