How to Become a Better Investor with Bigger Profits
Investment has become a trend among Indonesians. Not just business people, now the younger generations have also tried investing. Though it is not a simple process, you can learn more about how to invest your money. Especially now, more applications and tools are available to help you invest as well as analyze the risks and returns of each investment product.
Interested to become a better investor? Follow these tips from Tae Yong Shim, CEO of Mirae Asset Sekuritas Indonesia and alumnus of BINUS BUSINESS SCHOOL MM Executive in Strategic Management—who shared his insights on the business and investment sector during the COVID-19 through the webinar on Wednesday, 15 April 2020—to start your path in becoming an investor and getting more profits.
Save some money
First and foremost, investment starts by setting aside some money. Your paycheck should cover all your essentials and non-essentials needs, including debts and savings. If your spending is good, there will be money left over to use for investment.
Remember, investment is not the same as savings. The money that you use to buy bonds, stocks, or any kind of investment products is the exact amount that you are willing to risk. Therefore, it is best to have both savings and investment, to minimize the loss that you may encounter.
To minimize loss, you can also diversify your investment. Think of investment as several baskets where you can put different fruits in each one. You should never put all of your investment money in one stock or bond, spread it across different investment products.
Learn and do technical analysis
Technical analysis is based on stock prices and volume, a way to predict the price movement. There are several types of technical analysis, most notably are Stochastic, MACD, and Williams %R. In order for you to be able to do technical analysis, you must have the determination to study more.
Basically, technical analysis is done to determine the best and worst-case scenarios by looking at past data. The data is in chart form, ranging from the candlestick, open-high-low-close, line, area, and Heiken-Ashi shapes. Each shape requires different approaches.
The technical analysis indicator involves a few main categories. The first one is price-based, followed by volume-based, breadth, overlays, and non-chart based indicators.
Calculate the ratio
Unlike technical analysis, fundamental analysis is based on the company’s values and disregards the market prices. Earnings (EPS), projections, return on equity (ROE), price-earnings ratio (PE ratio), and price-book ratio (P/B ratio) are some components of fundamental analysis. Some investors would rather focus on either technical or fundamental analysis, though it is highly advised to do both.
When you are doing fundamental analysis, you are analyzing the company’s assets and revenues, calculating the risk and return of the stocks. Although this takes a longer time to do and requires more attention to detail, investors can actually foresee the potential and growth of the company that they want to invest in.
Become a futurist
Have you ever wondered what could happen if you were to invest in Apple or Samsung during the ’90s? As expected, you will receive massive returns, since Samsung Electronics stock market experiences 8.7x returns and Apple experiences 73.7x returns. It is not too late to be a great investor, innovation always comes. That is why you need to be a futurist, able to see the hidden potential of newer companies and businesses.
A futurist is the highest level of investing, meaning that you believe your instinct and prediction of how a certain company can be bigger and more profitable. This is something that market prices cannot provide you.
Always have the mindset of “what will people need next?” in your mind. This will help you see rare opportunities in investment that most investors would not dare to take.
Focus on long-term investment
Long-term investment means that you withhold this investment for more than 3 years, generating more profit the longer you keep it. Though it is certainly riskier than short-term investment, it is deemed as more profitable.
Stocks are one type of long-term investment and generally the most common one. By investing in stocks, you can have higher returns over the years. Long-term investment can also save you some money, seeing that short-term ones require management or trading fees.