Making Passive Stock Trading Work for You
Most people are afraid to venture into stocks because of the lack of knowledge and the risks involved. However, there are actually two ways of stock trading: passive and active. For those with less knowledge or nothing at all, passive stock trading may be the key to start building funds for the future.
What is a passive trader?
You’re a passive trader if you want to invest your money on stocks without spending so much time reading charts and understanding trends. You largely entrust your money on a trusted agent and patiently wait for investment to grow.
At the onset, you need to research about the company – its value, investment goals and overall financial health. After which, you decide if the company is worth the risk. You don’t want quick gain, but after long-term profits, so occasional loses don’t matter as long as your capital remains intact.
How to do Passive Trading?
First off, you really have to get over with your absolute ignorance of the stock market. A little knowledge goes a long way in your investment career. Attend seminars, read trading materials, and talk to a friend with experience.
Second, ask recommendations for an agent or manager you can work with. The investment manager makes the decision for you, and is the one who tracks and duplicates indexes to make the investment work.
Third, trust your manager’s instincts and decisions. As a passive trader, you can’t expect your investment to outperform the chosen market index, but you’re doing all right as long as your manager effectively and closely duplicates that index.
Investing in mutual funds is one of the most passive ways of stock trading, in that you put up your money along with other passive investors and wait for at least five years to start reaping your gains without incurring charges. With mutual funds, you are literally hands off your investment and put 100% trust on the policy (finance company) you choose.