Becoming a skilled trader

Trading is an active style of participating in financial markets, but on this site you will find information about more traditional buy-and-hold investing as well. Today, many people aren’t sticking to just trading or just long-term investing. Instead, they spread risk by trading with some of their money and investing another portion of their money. The investments are often a mixed portfolio that contains everything from fairly short-term investments to really long-term ones.

Trading and investing can be a full time job, but it can also be a lucrative hobby. Saving for the future and earning money to fulfill your dreams doesn’t have to be boring chore. Many people lose out on the fun by only focusing on how much they have to give up today to be able to save for the future. Instead, you should see saving, trading and investing as a hobby in itself, not a boring chore that must be done.

It is easy to throw ones hands in the air and proclaim that money matters are too complicated, stuff some money into a mutual fund and then forget about it. But if you instead start learning more about personal finance, you will probably encounter aspects of it that you find fascinating and that can help you tailor a trading- and investment strategy for your self, both short-term and long-term.

Continuous income or future realization?

If your aim is to let your money continuously make more money for you, you can for instance invest in company’s that pay dividends to their owners or in real estate that can be rented out. Day trading or other forms of short-term trading is also a possible choice, provided that you have enough time and energy to devote to it.

If you on the other hand are okay with not making any profit until some fairly distant point in the future when you sell the asset or it expires (depending on the type of asset), you can for instance invest in bonds, put money into investment funds, or buy precious metals. You can also buy real estate and stocks that you hold on to primarily for the chance of value appreciation rather than to get a continuous stream of rent income or dividends.

Risk

Trading and investing is always risky. The stock company you own shares in may file for bankruptcy. Real estate can drop in value and a neighborhood can become unattractive to renters. The investment fund you put money into may sink like a stone due to poor investment choices. There is always risk. It does not matter if you are in to high risk binary options trading or something safer such as bond trading. There is always risk.

Of course, filling your mattress with $100 bills isn’t exactly safe either. Not even gold bars in a bank safe or chests filled with precious stones buried in the sand on a tropical island will completely take risk out of the equation. Currency can lose in value due to inflation, the gold price goes up and down, and so on. There is also the risk of having your valuables stolen, destroyed or confiscated.

So, instead of trying in vain to eliminate risk, we need to find a way of managing risk. One common way of doing it is to spread the risk. Invest in different types of assets, make long-term and short-term investments, buy stocks in many different companies belonging to many different industries, spread out geographically, and so on.

You can find more information about risk management in the article “Determine your risk tolerance” on this site.