Then you just sit back, and get rich. Right? That is what most first-timers think - but they end up losing money instead. What is the catch?
First, you need to know what to buy. Next, you need to know when to buy. Even after correctly deciding what and when to buy, you won't get rich if you don't know how to manage your own portfolio.
The 'what' requires knowledge of fundamental analysis. It helps to have accounting knowledge in dissecting Annual Reports. But basic math skills and common sense are often good enough (unless you have ambitions of being a research analyst in a fund management house).
The 'when' requires knowledge of technical analysis. Again, it helps to be a science graduate or engineer to understand the benefit of graphs drawn on semi-logarithmic sheets. But it isn't rocket science - and the basic concepts are quite simple to understand and apply.
The 'portfolio management' part is often not clearly understood or appreciated by most small investors - even many experienced ones.
In an article in investopedia.com, Brian Bloch explains the 4 key elements of a well-managed portfolio. Here are a couple of excerpts from the article:
"Any investment process must involve planning, organization, leadership and control to some extent in order to be considered managed."
"Portfolio management is defined as the art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance. This is a very specific definition of management in the investment context."
You can read the full article at this link.
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