Roberto Russo
- Apr 1, 2021
- 4 min read
When do you need trading professionals?
One of the biggest challenges when constructing a portfolio is not about what to put your money in, but more about how to do it.
Anybody can allocate 25% of their total portfolio, choose four of their favourite bluechip stocks, wipe their hands clean and call themselves 'an investor'.
Let's say your four favourite bluechips move identically to the index. The XJO is green and your portfolio is green; the XJO is red and your portfolio is red. And you are left wondering why.
Your ROI is calculated straight against the index, not much of a difference? Bit of an opportunity risk isn't it?
This is where you need professional general advice.
In this article, Roberto Russo, our Equities Trader, will explain why individual investors need professionals; and the benefits of working with them.
Why do you need a professional?
A professional would tell you in the above example that your stocks have a beta of 1, and diversification is needed due to positive correlation.
However, construction of a diversified portfolio is where most people go wrong. The dynamic aspect of placing your investments into different sectors at different market cap valuations enables the full value to come out.
This is a mentality which has been lost throughout the COVID-19 crisis, as people are resorting back to staying true to their staples such as BHP, RIO, FMG and TLS due to their discounted prices, and staying true to precious metals, what to date has been a rough gig.
A lot of conversations we have with those who are involved with larger institutions are exactly the same: the same bluechip stocks, the same large cap staples and big positioning.
Time after time, we discuss the importance of being nimble and versatile, especially in these market conditions, to allow a quick escape or to be able to build a position.
In addition, many individuals also don't consider the opportunities outside of portfolios, such as access to specific investments. Maybe there's a Pre-IPO opportunity available that you really like the sound off, then you will most likely need to open an account for compliance with the broker to access the deal. Likewise, maybe your favourite little gold company is doing a capital raising, then you would need a professional in order to access that deal.
In addition, many individuals also don't consider the opportunities outside of portfolios, such as access to specific investments. Maybe there's a Pre-IPO opportunity available that you really like the sound off, then you will most likely need to open an account for compliance with the broker to access the deal. Likewise, maybe your favourite little gold company is doing a capital raising, then you would need a professional in order to access that deal.
What are the benefits of working with a professional?
1. Expand your deal flow:
By working with a professional broker, you can get access to investment opportunities that are not released to the public. Normally, a professional has access to specific deals such as Pre-IPOs that are private and send them out to their database only.
2. Better manage your portfolio:
Having a professional will make your life in the markets significantly easier to manage than going about it on your own. You can get the benefit of support around your portfolio from your broker. Besides, when a portfolio gets too big monetary wise, it becomes much more difficult for you to manage.
3. Receive more insights into the market
A professional can grow your wealth instead of preserving it. They would offer ideas that you would have never considered. They can provide you with fresh ideas about how people are trading; how the latest stocks are performing, and many more. Oftentimes, using two brokers can be beneficial instead of relying on only one broker.
Over the long term, there has been no better way to grow your wealth than investing in the stock market. The most valuable asset you have with investing is time. Every month you wait to get started by opening a brokerage account and starting to invest is one month less that you'll earn the long-term returns that add up over time and transform even modest amounts of money into true wealth. By looking for a professional that best meets your own personal and financial needs, you'll be in the best possible position to achieve all of your financial goals.
One-Minute Podcast: When do you need professionals?
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