When you hear stories about Wall Street moguls, it’s almost guaranteed that you’ll overhear some crazy investment strategies as part of the plot. You’ll hear about "chartism," day trading, and of course, hedging bets on the market. It’s tempting to want to try the same investing strategies, right?
It’s no surprise that a well-managed stock portfolios that use professional-grade investing strategies tend to outdo the market. However, there’s a reason why most people should stick to basic investing strategies like buying good companies and holding the stock for the long term, or just buying smaller portions of good shares every week.
Professionals have more tools, more training, and also more knowledge than us retail investors typically do. Those who want to try more advanced methods should watch out for signs they should stick to the basics—such as the ones below.
You don’t have much time on your hands.
Time is the big thing that is very hard to manage when you’re working your own portfolio. Professionals have a lot more time on their hands than you do, and they use that time to maximize their profits.
Without adequate time to do your research, you will not be able to make things work in your favor. People who are low on time should just consider doing dollar-cost averaging or opting for a "set and forget" investment like an index fund.
You are a "leap before you look" type of person.
This should never, ever be the case when you’re investing in anything. Due diligence is crucial to investment success and if you don’t do your research before you plunk money down, you will end up failing—and pretty horribly, too.
Once again, this is a sign you should probably stick to a robo-advisor app like Betterment or Wealthfront. The bots will do the hard work for you.
You’re an emotional investor.
Investing should never be based on fear and the need to be proven right; it should be based on the numbers. Numbers don’t lie, but your heart sure will.
People who do more advanced forms of investments are very numbers-oriented. If you are the type of person who regularly "panic sells" the moment the stock market has a downturn, you really need to rethink getting more involved with your investment strategies.
If you were honest, you’re really not knowledgeable about stocks.
What’s beta, again? Wait, is how can you have an inverse ETF? Advanced trading strategies require a lot of knowledge about the stock market—and that means that you should know your lingo!
If you don’t know about the stats that you’re supposed to be researching, you probably should stick to robo-advisors or professionally-managed funds. These require less knowledge and are generally less risky than trying to "go it alone."
You don’t follow through on plans.
In order for any investing strategy to work, you have to plan it out and follow through. If you regularly start projects, switch them up, and then forget about them, advanced trading strategies will not work out for you. After all, how can they? You need to give them a chance in order to make them happen.
You’re looking for a "get rich quick" solution.
Nope! Not a good idea. Real wealth is not built up quickly. It’s built slowly over time and through careful management. If you are trying advanced strategies in hopes that your money will explode in the bank, you’ll be grossly dissapointed.
The person who advised you to start investing using advanced strategies offered to teach you how, for a price.
Though there might be some exceptions to the rule, this is about as sketchy as it comes. Most people who promise great returns using advanced strategies are not actually making money off the stock market; they’re making money off the fools they cheat out of money.
If you were told that there’s a foolproof "system" at hand, then you are probably being taken for a ride. There’s absolutely no such thing as a free meal, and there’s definitely no "golden ticket" to wealth. Anyone who tells you different is trying to sell you something.
You’re unwilling to learn new strategies, read up on potential investments, and read up on what Wall Street professionals advise.
There’s being unable to learn about stocks, and unwilling to learn more than you already know. Inability is not something you can fix unless things change, but if you really aren’t into learning, you should never try to take matters (fully) into your own hands with investing.
Here’s the thing with investing: you should never stop learning, especially if you’re trying advanced strategies. If you are unwilling to continue hitting the books after you put your strategy into place, you might end up doing yourself a huge disservice.
The only reason that you really want to get into advanced trading is because you saw The Wolf of Wall Street.
Though that movie was based on a true story, you should never expect Hollywood-style stuff to happen with your stock portfolio or your trading. The vast majority of investors do not see billions out of their investments, and chances are overwhelming that you won’t either—unless you work your butt off.
Contrary to popular belief, investing really isn’t that glamorous. It’s tough work that can easily cause you to lose everything you’ve earned if you’re not careful.
You can’t stand risk.
All investing is risky; there’s no escaping that fact. However, if you choose to create your own advanced method of investing that goes beyond using index funds, getting a robo-advisor, or having a diverse array of ETFs, your risk is going to shoot through the roof.
You’re looking to time the market.
Timing the market does not work, unless you’re someone like George Soros. If this is your ultimate goal, it will almost certainly cause you to lose what you’ve made—and is the clearest sign that you need to stick to the basics.