Tracking your stocks more passively to mitigate emotional decision-making: here’s how
Investing is becoming more mainstream due to rising inflation and a lack of other lucrative investment opportunities. Not just that, it is also considered an ‘inflation killer’ for your capital. When prices drive up, the companies are also increasing their revenues through their sales. This, in turn, will lead to higher dividends and thus a higher yield on your stock. In this article, we will look at how you can invest passively with limited risk exposure while mitigating emotional decision-making. This can be achieved through the use of technology. A good example is the use of a stocks tracker.
Why passive investing works for the many
When it comes to investing, there is much jargon and financial details involved. For many of us, this requires some heavy studying to get familiar. Next to that, there are already lots of people that can outsmart you in the field. Luckily, you do not necessarily need to take all the effort. Passive investment is a strategy that works for many and even outperforms many investment vehicles.
How to get started
To start with passive investing, you need to make sure that you have a strategy in place. For example, you need to have a spread across industries and markets to make sure you limit your risk exposure. This can be achieved through the use of index funds, which are often purchased as Exchange Traded Funds (ETFs). These funds track the index and can be purchased through online brokers and banks. Good examples of these funds are provided by Vanguard, MSCi, and trackers of the S&P 500.
Once you are investing periodically in these funds, you can sit back and see your capital grow. You do not need to buy and sell, but simply let your investments compound over time.
Becoming a bit more involved
For some investors, this is considered a boring strategy. They start to make more emotional decisions and focus on riskier growth stocks. Typically, when emotions come into play, the returns on equity become lower. This is why passive investing is often the best option. However, you could also consider becoming a bit more involved. This is possible through a core-satellite approach. This means you have a solid core at the heart, consisting of ETFs, and have satellites that change over time with riskier investments. The satellites can be changed over time, while the core is the majority of the portfolio and remains fixed.
Hereby, you can have a good balance between relatively safe and more aggressive stock options. This allows you to increase your potential growth while having a solid core at the heart.
How a stocks tracker helps
There are many ways a stocks tracker can support these strategies. For example, you can leverage a portfolio tracker to have a complete overview of your assets. In these tracker applications, you can create clusters of stocks, allowing you to have separate overviews of the ‘core’ and the ‘satellites’. By setting your Key Performance Indicators (KPIs), you can then track if you are delivering the expected returns.