The dangers of chasing the ‘thrill of the trade’

*This content is brought to you by Brenthurst Wealth

By Lloyd Uren* 

The rise of user-friendly apps and platforms has made it tempting to view investing as an exciting activity, almost like a game. However, it’s important to remember that the aim of investing is to provide a source future income, not a source of adventure and risks.

These principles seemed to fly out the window during the COVID pandemic when apps like RobinHood allowed ordinary people to directly ‘play the market’. And even though COVID was a unique event, self-directed investing has grown in popularity and come within reach of ordinary South Africans.

Today, you can choose to invest directly in shares through services like EasyEquities, Investec’s recently launched trading platform or on your banking app.

Changing the face of investing

However, this democratisation of investing is a double-edged sword: it offers unprecedented opportunities but also carries the risk of trivialising investment decisions.

The appeal of these platforms lies in their simplicity and the instant gratification they offer. They turn investing, traditionally a long-term endeavour, into something that feels immediate and even exciting. 

This is a significant shift away from the historical approach in which saving for your retirement investing is done in consultation with an investment professional or qualified advisor. Now, virtually anyone with a smartphone can trade stocks, cryptocurrencies and other assets with just a few taps.

However, the fundamental nature of investing hasn’t changed. It remains the best way to secure your financial future and demands careful planning and consideration. 

Core investment principles still apply

The reality is that few casual investors have either the expertise or time to thoroughly analyse the investment fundamentals behind their decisions.

The thrill of making quick trades and the potential for immediate returns can be enticing, but they often overshadow the core principles of successful investing: patience, research, diversification, and understanding market trends. 

The problem with treating investing like a game is that it can lead to impulsive decisions, driven more by emotion than rational analysis. The volatility of the stock market means that these decisions could easily become a costly mistake if sentiment or economic conditions turn negative. 

Add to this the stress and anxiety caused by sudden market moves, and you could also be putting your physical and mental well-being at stake.

It doesn’t have to be all or nothing

My advice to investors who are drawn to the excitement of managing their own investments is to adopt a more balanced approach.

Instead of putting your entire portfolio at the mercy of the market’s whims, consider setting aside a small portion of your funds – an amount you can afford to lose, quite frankly – for self-directed investing. 

This allows you to experiment with the market’s dynamics and gain first-hand investing experience, without putting your primary retirement savings at risk.

Using this smaller sum for active trading, you can explore different strategies, learn about different sectors and companies, and get a feel for the market’s ebb and flow. Meanwhile, the bulk of your investments should be focused on long-term growth and stability, preferably under the guidance of a financial advisor.

Your financial advisor’s role is invaluable in navigating the complexities of the market. An advisor can provide expert advice on portfolio diversification, risk management, and strategic planning, helping to ensure that your investments align with your long-term financial goals and risk tolerance. 

It’s difficult to argue against the ease of use of these new investing platforms, yet you have to see them in the context of your long-term financial strategy. 

Balancing self-directed investing with a solid, professionally managed investment plan allows you to explore and learn from the market while ensuring the security and growth of your primary investments. 

Successful investing is a marathon, not a sprint, and the goal is to build a secure financial future, not just to experience the thrill of the trade.

* Lloyd Uren is a junior advisor at Brenthurst Wealth Stellenbosch. [email protected] 

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