The natural inclination for anyone that hears about a new means of making money would be “how do I get involved?” It is therefore only right to not just dangle the carrot in front of faces but also to share tips.
Despite the fact that investing in shares, securities and now Cryptocurrency, as mentioned in the previous blog, comes with a very high risk. Your portfolio can be managed carefully to minimize the risk and here is how.
Before we progress, please note that this is not fail-safe advice but only a guide, so do take heed of our disclaimer.
As a rule, this applies to any website offering advice. In addition, we would like to warn you that just like eating regularly at a fast food joint – the risks are clear.
So if you (hopefully) know your appetite for risk or have a lack of financial discipline and take this article as information gathering to enhance your awareness.
So now we have cleared that point up we would like to reiterate that running and maintaining your personal investment portfolio can be an easy task but requires a bit of practice before jumping straight in.
The first step is to identify the various forms of securities available, research articles written in the news and then start a trial with an online trading account.
There are several institutions offering online trading (each with its criteria for entry and for trading).
Banks also offer this service but might charge a monthly service fee for it so the first step is to do a little shopping around.
Not all online trading platforms are offered globally so one must find one that follows the financial compliance laws in your country/continent or territory.
This is important because, like any other investment, your profits from trading are subject to tax (of which evasion would be considered fraud). The type of tax, in this case, is Capital Gains Tax (CGT).
This is payable as a percentage of up to 25% of your profits once you have closed a position and cashed out from the trading account.
The CGT would have to be declared and paid for directly to your local authorities when you fill out your tax returns.
There is still a grey area as to whether Cryptocurrencies are to be classified as taxable assets – which might work to your advantage.
In Germany and some parts of Europe apparently, if you hold (without closing or selling) Crypto assets traded on an online platform for more than a year – you are not liable for taxes on them.
Nevertheless be sure to factor CGT into your calculations and don’t get caught out with that!
The actual trading itself would require some sort of strategy including a combination of high risk and lower risk asset classes. ETFs and Equities are more on the “lower risk” side as they are purchased on a long-term outlook (the better equities even offer holders additional dividends from company annual profits).
Purchasing equities in well-grounded tech companies such as Amazon; Microsoft; Google; some of the older banks; telecommunications and energy companies is considered to as long buying. We highly recommend this option.
However, while you sit on those over the months or years you would still want to make some short-term gains. This is where your high-risk high returns securities (Forex, Indices, Options, and Cryptos) come into play.
As a rule of the thumb, your high-risk assets should only be between 15-20% or less of your overall portfolio.
This way any losses incurred can be absorbed or regained over the following few months allowing you to buy into the more stable longer-term equities.
Like a business, your trading portfolio can grow exponentially if you continue to re-invest your gains-profits.
So, while any gains made in the short-term (high-risk vehicles) can be used to purchase the next long-term security or in case of emergencies, can be withdrawn to cover other needs (holidays, unexpected debts). It is better to regard the collective portfolio as a long-term asset.
Here are four quick basic steps to getting into trading.
Decide on an amount outside your other investment vehicles (property, savings, mutual funds or bonds) that you would set aside for trading. Again, this must only be a fraction of your overall investment.
Most online trading platforms require a minimum amount to open a trading account of between 50 – 200 USD/EURs (you can use that amount for trading and doesn’t have to be kept as a deposit).
You will need to ensure you have a good enough Laptop/PC and broadband with all the required security software installed. You can also use your mobile phone for the short-term securities such as for binary options etc.
Platforms such as IQOption and are available via Apps for phones and tablets as well.
Before choosing the platform, make sure you understand the costs to be incurred while trading (due to the various pricing structures it’s wise to compare options).
Charges are usually as follows: in the form of commission with a purchase of an online traded asset, interest from leverage (margin trading) to purchase the asset (and while the asset is running), deposit fees and some even charge for withdrawal of funds.
So, while one platform may charge 0% commission on trading with some securities (or on say the first 10 trades), they may offer other securities that require leverage, or just charge a higher deposit fee – they are after all there to make money as well!
Use your free trial to work out which pricing model suits your trading needs in addition to learning the market trends and getting a handle on technical analysis tools.
As part of the service, you would also get access to online chat, a personal assistant to call during office hours about anything to do with your account/portfolio and the option to upgrade your account. So you are never on your own really!
Some trading platforms offer you benefits (in the form of cashable tokens or direct cash commission) for trading profitably, referring someone onto the platform and when they make money.
One such platform called eToro is known as a social trading platform.
It allows you to “shadow” successful traders and pays “leaders” handsomely in return for the number of “followers” you acquire. You would have to be a relatively skilled trader to benefit substantially using this method!
The trading platform IQOption will reward the main benefactor if the persons referred makes profitable sales of their assets. This comes in the form of a direct cash commission paid to their account.
So now that you have familiarised yourself with the tools, you understand the costs involved and have analysed the technical aspects of the platform, you can begin real-time trading by switching from trial to a paid account. You will need to provide your banking details. Your bank account is where deposits and withdrawals will be made from.
Payment methods is another factor to consider when choosing the platform as while nearly all online trading platforms accept most widely used credit cards.
Other platforms, which are usually located in your geographical region, allow you to pay from your local (debit) bank account, a PayPal or other types of online money transfer services.
The next step, which is important for security from both parties as well as for the financial and monetary authorities, is account verification.
You will need multiple forms of identity: passport, proof of residence, social security or tax reference number and of course contact details such as email and mobile (cell) phone number for various forms of authentication (e.g. two-step authentication to protect your account from unauthorized access or in case of password resets).
Once completed and have been approved/verified you are good to go! This can all take 30 mins (and processed online) if you have everything in place.
The final step to running your own successful trading portfolio is to exercise (or acquire) the skill of patience. Learn to watch the market trends and do not act on impulse.
The rule is simple: buy low and hold. Selling should only be done if you have credible information on the impending total meltdown of a company you own shares in. Otherwise like a rollercoaster, be prepared to watch your stocks go up and down.
When it comes to the risk of a downward trend you will have the tools on most of the platforms to help you control price movements automatically.
You do not have to always be glued to your PC or mobile device to attend to the longer-term securities.
Binary Options (now illegal in some countries) are different though and require quick execution of trades. Have a look at the first section of the resources page to familiarise yourself with how high-risk securities work.
But for all others, you will have tools such as stop-loss orders, take profit/limit order, pending orders and trailing stop orders to help you protect your profits and stop colossal (negative gains) losses.
Go forth and make a fortune – or at least some passive income and a decently rewarding long-term investment supplement!
RISK WARNING: YOUR CAPITAL MIGHT BE AT RISK.