A financial advisor is someone who helps people make smart investing decisions. Some financial advisors work one-on-one with their clients, while others have a less formal arrangement. Whatever the case, these professionals dispense sound investing advice — if they’re good at their jobs.
I’m not a financial advisor in the traditional sense. I don’t work at a credit union or bank and meet with clients at my cherry wood desk. Instead, I teach people money management tips by speaking, writing blog posts, and sharing my publications with subscribers.
So, if you were standing in front of a financial advisor right now, and you asked him or her about sound investing, what would he or she say?
Start With a Small Trading Account
There’s no reason to keep up with the Joneses. Don’t empty your entire savings account into your trading account and, above all, don’t risk the entire sum on a single play. You have to wear floaties before you can really swim.
Financial advisors are teachers, first and foremost, and just like teachers, they teach addition and subtraction before moving onto algebra and calculus. Your knowledge builds on itself. Some of the best money management tips I’ve offered have dealt with taking your time and making sure you have the requisite information to make a play.
Starting with a small trading account keeps you humble. You’ll learn how to make smaller investments and watch how they play out. This is the best way to teach yourself to pay attention to patterns and to avoid following the latest promoters’ promises on Instagram.
Trade and Invest With Profits
Let’s say you start by funding your trading account with $1,000. That’s just an arbitrary figure. Over the next three months, you double it. Now you have $2,000 in your trading account.
You have two choices. A financial advisor might recommend removing the first $1,000. That was your initial investment. Now you’re only trading with profits. Even if you lose all $1,000 of your profits, you still have the money you put into the game, which means you didn’t lose anything.
Money management tips often focus too much on profits and not enough on stemming losses. A financial advisor wants you to consider all sides so you don’t lose money hand over fist.
Diversify Between Trading and Investing
Investing and trading, as I’ve said before, are two different things. Investing is for long-term wealth management and growth, while trading is for incremental profits.
One financial advisor might suggest focusing all your money on investing, while another might recommend using your entire savings for trading. I disagree. Find a healthy mixture for your portfolio so you can benefit from both types of plays.
Rotate Market Sectors
As you gain more experience and gather more money management tips, you’ll discover that each sector of the stock market behaves in different ways. Whether it’s energy, consumer products, healthcare, or tech, the sector has its own personality.
When you rotate market sectors, you gain experience with all of them. If you’re feeling bearish on one, move on to another on which you feel bullish. That way, you’re one step ahead of any losses you might have otherwise incurred.
Pay Careful Attention to Sentiment
Market sentiment is vastly underrated. This concept refers to how people feel about a particular stock, industry, or sector.
Negative market sentiment usually leads to falling stock prices. Positive market sentiment sends price action in an upward direction. A financial advisor would tell you to keep your finger on the pulse of market sentiment so you can either go with the flow or try your luck at moving against your contemporaries.
Learn How to Read a Stock Chart
Yes, it looks boring. But reading stock charts is one of the first things a financial advisor will recommend you do. Over time, those little patterns will become far less boring and far more fascinating because you’ll know how to interpret them.
If you can’t bear to stare at stock charts for a couple hours a day, get money management tips through Money Map Report. It’s my highly sought-after publication, and it will help you make smarter stock market plays without having to do all the research.
Don’t Neglect Your Retirement Account
Everyone needs a retirement account. Even if you’re a day trader with a fantastic track record, you need the security that comes with an IRA or 401(k). No financial advisor with any real wisdom or experience would tell you otherwise.
When people ask for money management tips, I’m pretty consistent. Learn how to trade actively, but don’t neglect retirement. Make sure that nest egg will be waiting for you when you decide to retire from your job.
Cut Losses Fast
A financial advisor will tell you that losing 5 percent is far more preferable than losing 20 percent. And I think you would agree with that statement.
Too many traders assume that a stock price will eventually bounce. They watch it plummet dollar by dollar until they have nothing left. Maybe that stock will increase again in the future, but don’t risk it. When price action moves against you, sell your shares and move on. Expect your next play to more than cover your losses.
A financial advisor can be a huge asset when you need financial planning advice and help setting up your retirement account. If you’re interested in just the facts about stock market investing, though, I recommend signing up for High Velocity Profits.
It’s the ideal solution for swing trading, day trading, and trading options. You won’t be sorry you joined me.
I’ll share the pattern I identified years ago and tell you when to enter and exit a position. It can’t get easier than that. Let me take the research and frustration out of trading so you can begin profiting faster.