Everybody would like to make a little bit more money. Who would really say no to extra cash? While there are several ways to make more money, some are fun and some are pretty boring. The funny thing about investing in the stock market is that it could result into an exciting experience while it can be pretty boring. However, if you want to increase your annual returns, you must pay the price of not having so much fun with your portfolio.
I used to be thrilled by stock trading
When I had my first experience with the market, I was 23. I decided to withdraw 17K from my personal line of credit and trade stocks. I was not really excited by mutual funds or having a financial planner telling me what should be my asset allocation. I wanted to make money and I wanted to trade on my own.
I did for 3 years and I was doing fine… until the market started to slow down as I was starting to make mistake because I was getting overconfident. This is where I realized that trading stocks from months to months is not a hobby, it is a real job. People that are specialized (and make money) in the stock market are traders, not some young folks trying to make extra bucks for their summer vacation!
Then I became more reasonable
Along the years, I realized that the best investments would work within a long term strategy. Therefore, I had to stop trading stocks actively and start holding my investments for a while. When I started trading and I needed cash to buy the “next hit” I was simply selling a stock that I was already making profit. I realized that I left a lot of money on the table because of that!
Now, I am trying to establish a more disciplined investing strategy. I determined my priorities for my smith manoeuvre strategy and it works pretty well so far. Now, I am trying to do the same thing for my RRSP. If most fund managers can’t beat their index, how come a young guy like me spending only a few hours a week on his portfolio would ago against all the odds?
When you look at people that are actually making money with the stock market, you will realize that most of them have a pretty boring investment style. They take their time to select their investment, they wait the right moment to buy and then they hold their strategy forever.
So this basically mean that if I want a good return with my RRSP portfolio, I would have to make 1 or 2 trades a year. I was definitely not too excited about strategy but, after awhile, I realized that I could make real good money that way.
In the end, I am still having fun managing my portfolio, but I don’t get thrilled by the emotion of waiting to get my stock price and buy, sell weeks after weeks… I guess I’ll get back those emotions once I reach 500K in investment value 😉
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