Investing part-time is a great way to grow your savings without having to monitor price ticks every waking minute. But even if you’re not pursuing investing full-time, you still have to carry the inherent financial risk associated with financial markets. Here are three tips to help you succeed as a part-time investor:
Irrespective of how much investing you do, it’s important to have a systematic approach rather than an emotional one. You cannot solely rely on gut instinct when choosing what asset to invest in. Having a technical strategy helps you avoid making bad investment choices and the consequent destructive impulses that follow, including overtrading and revenge trading. Fortunately, there is a surplus of highly technical systems that you can easily adopt to your own investment strategy. This includes quantitative analysis, small cap investing, sustainable investing, etcetera.
Choose Long-Term Positions
Investing on the side means you have a limited amount of time to devote towards managing your current positions as well as looking for new ones. It’s best to stick with positions that materialize over a longer period of time, say several days to a couple of years. A buy-and-hold strategy is both low maintenance and relatively low risk since the position, if executed precisely, is less vulnerable to daily price volatility. Dividend and growth stocks are oftentimes the top picks for a long-term investment portfolio.
Investing should be thought of as a business rather than a hobby. Treating it like a hobby can result in financial losses. But by setting boundaries, you create a business that operates with clearly defined objectives, a predefined level of risk, and tools and resources that you can circle back to when you encounter issues. Some boundaries to establish include hours when you should be looking at financial markets, data points to focus on, risk and reward targets, maximum number of positions open at any given time, etcetera.
The success of any investment venture revolves around proper risk management. Before anything else, you should always control how much money you might lose at any given time with any of your open positions. By controlling risk, you allow your capital to appreciate in value without subjecting your account to sharp drawdowns.