The introduction of retail platforms with user-friendly interfaces has increased opportunities for people to invest in stocks and shares online. Even without a financial background, these intuitive interfaces can help people buy, sell and track their investments.
Other introductions, including fractional shares, allow users of online platforms to purchase a portion of a stock, even if they cannot afford a whole share. This feature is applicable to popular high-priced stocks such as Tesla or Amazon.
The fact that these online platforms can be accessed via their smartphone also makes it much easier for people to consider DIY investing, with a level of convenience not readily available from brokers.
John Lowe, also known as the Money Doctor, is pragmatic when it comes to dabbling in stocks and shares. He quotes the famous line from Hamlet, when Polonius advises: “Neither a borrower nor a lender be”.
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And although Lowe admits to enjoying a little flutter, he offers words of caution: “The stock market is a gamble and individualising stock selections is a gamble at all times. So [by] using Revolut, N26 or even Degiro as a platform for your gambling needs, you are risking your money – and potentially all of it. Which is why I personally prefer the managed fund route.”
Lowe prefers to spread his risk across separate funds. These are numbered to reflect the level of risk: the lower the number rating, the lower the risk associated with the fund.
However, for anyone still considering the DIY approach, there are some general rules to ensure financial security. While retail platforms offer reduced fees compared to brokers, this does not mean they are fee-less. Some platforms include transaction costs and currency conversion fees and it is important to check out any hidden or unclear charges which can erode possible profits.
It also goes without saying that retail investors should only gravitate towards regulated platforms and avoid sites or apps that fall outside European governance. However, once confident that the platform is regulated and fees are understood, the next step is to consider what stocks to investigate.
The reason brokers come with higher fees than DIY apps is twofold. Firstly brokers have access to research and knowledge of both current stocks and historic movements; secondly the advice they offer is impartial.
Often, DIY investors will invest in stocks in an industry with which they are familiar. While this makes sense in terms of understanding the companies and can also make research easier, it can have the unintended consequence of polarising choices and limiting diversity.
It is advised that would-be investors consider their strategy before beginning any investments. This advice covers the amount they wish to invest and limits on funding. It is easy to get carried away and decide to invest more money if the stocks are going in a certain direction. Likewise, in a volatile market an inexperienced trader might close out a position which, if held, might reverse back into profit.
Having a strategy before investing – for example, determining at the beginning that the investment is for a period of time or that a sell option might be triggered by a price point – will help to eliminate emotional decisions.
Increasingly many of these platforms provide access to a wide range of financial instruments beyond individual stocks, including ETFs (exchange-traded funds), bonds, and cryptocurrencies, allowing investors to diversify their portfolios more easily. However, if the dazzling range of opportunities to invest leads to some trepidation, then guidance can also be sought from specialist advisers.
Lawrence-Stanley is a seasoned Bitcoin strategist, who tailors his guidance to suit individual needs and goals. He encourages people to really understand money and take the time to do their research.
“Poor people like me were always taught to work hard and save in fiat currency. Rich people are taught to buy assets that go up in value over time,” he says. He advocates buying Bitcoin little and often, citing a 10-year strategy as a good approach.
Finally, if successful or even if not, it is important to consider tax implications of investments, and even DIY traders would benefit from a good accountant.