I am glad to have received a few enquiries from my existing clients asking me how they should invest in ETFs with the profits they made with our Forex trading algorithms.
They have gotten the idea from my previous blog post. If you have NOT read it yet, go here.
As mentioned, I do not recommend any certain ETFs or any fund house for you to start your investment journey. This is because they are essentially the same. Competition in this industry has made them more alike than different.
So, it all boils down to your individual preferences, likes, and dislikes.
In this blog post, I will share with you some fundamentals of investing in ETFs for another stream of passive income.
Contrary to popular belief, investing in ETFs do not require you to have a big lump sum of money. Of course, if you have a big lump sum of money invested in a good portfolio of ETFs, you are going to reach your financial goals sooner than your peers. But in most cases, to start investing in ETFs only requires you to have a small capital.
My short answer is 1000USD.
Yes. This is all it takes for you to start your ETF journey. This amount shocked many of my clients when I told them so. They were thinking of a different number many times over.
Personally, I think we have come to a stage where it is easier for us to get rich now than ever before. We have so many legitimate investment vehicles to choose from and invest in. Most of them do not require you to have a huge capital to start.
Why wait? Get started today.
Keep cost down
Cost is a killer in all investments. It eats up your returns.
When your investment advisor shares with you an ETF that returns you 7% p.a. Be not too happy about it until you know your full cost of investing in it. Don’t jump into it at first sight. Do some due diligence first.
Most fund houses are very good in concealing their fees into your investment portfolio. Therefore, you need to know your full cost of ownership before you invest.
Knowing your full cost of ownership and taking inflation rate into consideration is what you get as your net return. This is the number that you must look at. Not the gross return of 7% p.a.
Many marketplace investment “gurus” proclaimed their “skills” in their stock selection and market timing. That by following their selection and timing, you could join their ranks of making “a few hundred percenters” in your investment portfolio.
But what they did not tell you is that they have missed those “hot” stocks themselves. They have missed their first boat of making the money from those stocks and they don’t want to miss their second boat of making money from you.
To the novice investors, these “gurus” are like gods. Paying a few thousands as course fees is a good deal to learn to be “a few hundred percenter investors”.
To the seasoned investors, we all laugh.
In fact, there have been tests that use monkeys to select stocks. In these tests, monkeys were blindfolded and threw darts at the list of stocks on the wall. And over a period of 1 year, it was found that those stocks selected by the monkeys randomly performed much better than those “gurus”.
In my opinion. Stock selection and market timing is futile. They are only good after the fact.
Diversify your portfolio
Instead of researching for your “hot” stocks and “best” timing, instead of trying to look for the needle in the haystack, we buy the whole stack. This is diversification.
To diversify your investment portfolio is good for your returns but you need to know how much diversification you need to achieve a reasonable and stable return year after year.
You need to know the co-relationship of each asset class or ETF fund that you invest in. Essentially, you want to cover a broad base and be negatively co-related as well.
However, don’t go overboard with too much diversification. This is because too much diversification can be bad for your portfolio. You need to know what is “enough” for you and for your portfolio to grow year after year.
Just like our Forex trading strategies. We diversify our trading risks with our 3-pronged approach – multiple algorithms, multiple currency pairs, and multiple time frames approach. Doing so, helps us mitigate our trading risks and increases our chance of profits month after month.
Like I always say to my clients, “Diversifying your portfolio in a broad base manner is likened to having many floats tied together in the ocean. You will feel more secure because your chance of drowning is very much minimized.”
Just do it if your want to stay afloat.
Stay invested, stay the course
When you have started your investment journey. You must see it as a 30-year journey.
Therefore, you need to adopt the mindset of a long-term investor. In this 30-year journey, you will encounter ups and downs in your portfolio. What would you do?
My personal advice to you is that, “stay invested and stay the course.” This is the same advice I practise in my trading and investment journey. This is also the same advice I give to all my clients. This is also the same advice that has made us and will make you money.
However, most investors could not “stay invested and stay the course” when their portfolios turned south. They hit the stop button and get out.
Like Warren Buffett said, “if you cannot stand the heat, get out of the kitchen.” A sound advice from a real investment guru. He lives by this rule. He stays invested all the time. He stays the course all the time. And when market turns south, he buys more, and he makes the most money.
So, will you stay invested and stay the course? Will you be the next Warren Buffett? Only time will tell.
Profitable investing to you. And thank you for reading my blog article.
CEO & Founder, AlgoInsights.