Investing vs. speculating: danger administration ideas for traders

5 mins read
Brian Loy

Individuals appear to have extra time and disposable funds on their arms. In consequence, a brand new breed of retail traders has emerged, additional fueled by the COVID-19 pandemic and the expansion of digital buying and selling platforms together with Robinhood.

In accordance with a Deloitte Middle for Monetary Providers report, an estimated 10 million Individuals opened new brokerage accounts in 2020. One other 6 million downloaded a buying and selling app in January of this yr and about one-third of the accounts have balances below $500. There’s elevated consideration to the rising function of retail traders with rising buying and selling quantity, speculative buying and selling and market functioning. Thus, we discover it well timed to assessment danger administration ideas for novice and skilled traders alike.

I’ll use the knowledge from two extremely regarded funding managers: Peter Lynch, who previously ran Constancy’s Magellan Fund and the “Sage of Omaha,” Warren Buffett, CEO of Berkshire Hathaway. 

“Know what you personal and know why you personal it.” – Peter Lynch

“Threat comes from not realizing what you’re doing,” and “Two major dangers traders ought to keep away from in any respect prices: dropping cash and insufficient funding returns.” – Warren Buffett

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