How could retail investors invest well in the stock market? | 2022 best

Three critical points for retail investors to perform investment, Funds: To continue to make money to accumulate principal. Cognition: To establish one’s core investment concepts, learn fundamental principles rather than simple speculative methods. Mentality: Stability and Patience

Retail investors

In recent years, more and more people have begun to learn about investment and gradually understand the importance of investment.
Investment-related Podcasts and Youtube programs also appeared in large numbers. From 2017 to 2018, most young people were still not interested in investing. However, as the market became more and more popular, young people also began to learn about stock investment. But, more than 90% of retail investors’ performance is not as good as the broader market after entering the stock market. In the past two years, the bull market has made many people consider themselves investment geniuses, but in the first half of 2022, many people lost their money in the stock market.
Many retail investors study hard and spend time learning fundamentals and technical aspects, but why do they still fail to achieve good results after studying hard?

The answer is very simple. If you buy a good company or ETF, you only need to do dollar-cost-averaging, set a regular quota, and hold it for a long time, and your performance can be as good as the index fund.

The top three disadvantages of retail investors

Let’s discuss the three major disadvantages of retail investors: Funds, Cognition, and Mentality.

Funds

With sufficient funds, it is relatively easy to invest. But most retail investors do not have so many funds.
Delusions to making quick money with a small sum of money will, of course, cause a lot of problems.

Cognition

Cognition: refers to the concept and understanding of the capital market.
Some retail investors will listen to the Podcasts of investment advisors, watch Youtube or TV programs of investment advisors, and read many books on investment and financial management. Still, if there is no correct investment core structure or system, the information will usually cause you to lose money rather than help you to make money.
Learned the wrong investment condition that a particular operation can make a steady profit without losing money, but investing is not that simple. For example, many retail investors are addicted to Day Trade and think they can make money at no cost by looking at a few indicators.

Now many self-proclaimed investment experts often teach incorrect investment concepts. Although it cannot be said that they are all wrong, they are not always correct. For example, stock selection based on Dividend yield, which is not a good stock selection criterion at all, or to sell if the candlestick chart exceeds 80 and buy if it is below 20.
These methods may make money under certain market conditions, but in the long run, when they find that such operations cannot make money, they usually lose a lot of money already. Then many people would think that stock investment is deceptive and give up investment since then. That’s a pity.

Furthermore, many investment perceptions are conflicting, such as When a stock falls, should you sell or keep buying?
It may be suitable to buy under the A-scenario, but it’s the opposite under the B scenario.
In the stock market, there is not always a correct rule. If there is everyone, everyone is rich.
Everybody should integrate learned Stock knowledge into an investment system that suits themselves, and you need to rely on your actual trading for many years to accumulate experience. The investment system suitable for everyone is different because everyone’s economic level and risk tolerance are different to the same extent.

Mentality

Finally, it is the Mentality aspect: know there will be risks, but still do it.

For example, it is recommended not to buy at FOMO, but many people will still do it. Or, when buying a specific stock, I was determined not to sell it even if it fell 50%, but when it fell 15%, I sold it out of anxiety.

Training mentality requires experience and constantly challenging your comfort zone.

If retail investors want to increase their winning rate, they must start from the three aspects.

How could retail investors make improvements on these three aspects?

Funds

Funds: It is necessary to increase investment funds gradually.
It is recommended to have a regular job to bring about a stable cash flow than to be a full-time investor.

Cognition

Cognition: It is necessary to deeply understand the operation mode and nature of the capital and investment markets.
The stock market has many common operating rules, but they are not laws. Those common operating rules are similar to rules of thumb and investment wisdom. When learning investment, you must first understand the core principles of market operation rather than learning surface methods.

For example, to understand what kind of capital market has the potentiality for growth and what type of company has the potential of growth? Such fundamental concepts are essential to establishing an excellent long-term investment concept. In the future, you can make a reasonable judgment in the market through this core concept.

It is not advisable to use Youtube or Podcast to establish core investment ideas, because those ideas will be very divergent. It is recommended to find some good investment books to study and achieve mastery.

Learning the correct investment concept is more important than studying hard. Therefore, everyone should discreetly choose investment and financial management books to study and avoid learning lousy investment concepts.

Mentality

Everyone’s setbacks in the stock market are valuable experiences. However, in the face of the ups and downs of the market, everyone must focus more on the rules of investment and cannot change our operating principles with the ups and downs of the stock market. If you want to learn well investment and financial management, you are bound to experience some setbacks. As long as investors can learn from mistakes and adjust their methods and mentality, it will improve.

The giant inner demon is FOMO, and the fear of losing money is also a kind of inner demon. Such a gambler’s mentality will make people lose their minds and easily make wrong decisions at the moment.

Stability and Patience

In order to strengthen the mentality when performing investment, stability and patience are two critical elements.
In order not to let your emotions dominate your decision, don’t make decisions when you are extremely excited or panicked. For example, when you see a target you want to buy, you can wait a day or two before thinking about it again.
A perfect investment target will not be worse for two or three days. Investment is like a marathon, and you can survive in the long run with patience.

Conclusion

This article concludes as follows:
Three critical points for retail investors,
Funds: To continue to make money to accumulate principal.
Cognition: To establish one’s core investment concepts, learn fundamental principles rather than simple speculative methods.
Mentality: Stability and Patience
The above three key points are interlinked. The remarkable growth of one aspect will also help the other two aspects.