Resolved for 2017: Invest Like a Champ
December 30, 2016 | Alyson Nikulicz
For many Americans, the start of a new year means making new – or renewed – resolutions to get smarter about investing in the markets.
In fact, a TD Ameritrade survey of 1,000 retail investors found that contributing more to retirement funds and spending more time on investment portfolios were investors’ top financial goals for the New Year(1).
They are well-intended resolutions, but without a game plan for getting started, the odds are that these goals will remain aspirational until the end of 2017, when many find themselves vowing to make investing a higher priority in the incoming year… again.
But 2017 can be different, starting now. According to the top three winning teams in the 2016 thinkorswim Challenge, TD Ameritrade’s nationwide virtual trading competition for college students, successful investing starts with a little help from friends.
To get going, pair up with a buddy, or better yet, a small team, and hold each other accountable. This does not mean working exclusively with those who are like-minded, but connect with others who have complementary skill sets and who are interested in sharing investing ideas. All of this year’s winners stressed the importance of close communication with their teams and making investment decisions together. Nyatafe Mortoo, team captain of the first place team from UNC-Chapel Hill, found that his level-headedness balanced out his teammates’ reactions to market moves.
With a ‘Circle of Trust’ in place, it’s time to keep on top of market-moving events. Whether this means reading books, magazines or news sites, it’s important to make investment decisions based on the most current information and economic data. “It’s surprising how much the markets are affected by why happens in world politics,” noted Brett Wilder from the Challenge’s second place team from the University of Idaho.
Then, many investors chose to invest in what you know but be willing to take some risk. Grahme Taylor from UNC-Chapel Hill found that by narrowing the investing universe to the sectors where he and his teammates had the most familiarity – in his case, biopharmaceuticals and technology – they were able to uncover individual companies to trade much more easily than if they ventured into unfamiliar territory.
Remember, it can be worthwhile to learn about the different ways to invest in the market. Many investors have some familiarity with stocks, bonds, mutual funds and even exchange-traded funds (ETFs), but options strategies may be uncharted waters. The Challenge winners are no different. Shane Legatzke from Truman State and UNC-Chapel Hill’s Mortoo both took the Challenge specifically to learn more about options. If you decide to explore options, keep in mind that compared to stocks, options trading involves more risk and more complex risk and is not suitable for all investors.
Finally, take a deep breath, jump in and start swimming. The whole idea of putting money to work in the markets may seem risky, and for good reason, because it is risky, but as Spencer Wilson from the third place Truman State University team puts it, “It seems daunting, but if you have the desire to learn, trading can be picked up and understood.”
Keep in mind that it’s not just those who aspire to a career on Wall Street, anyone can learn to be a smarter investor. In fact, most of the members of this year’s winning teams have no intentions of becoming professional traders. They are simply college students with an interest in investing and a desire to learn more about making the markets work for them.
So forget the tired image of a lone shark on Wall Street, and for 2017 grab a buddy – or two – and consider investing in your future.