Investment Lighthouse In The Storm

Today, I like to share an interview that appear in The Standard newspapers:

Smart investors wanting to understand financial risk can learn from Wealth Mentors.

To Wealth Mentors, risk equals opportunity to gain more than you expected through smart observation and expectations of how market will react.

“Basically, we have different styles of investing,” said Mirriam Macwilliams, the Chief Trainer of Wealth Mentors.

To smart option investors, profits generated from the stock market are seldom  affected by the ups and downs of the market.

There are two types of options, “call” and “put” which allow options investors to make money both ways.

When a stock is expected to rise in price, people will buy “call” options on it. On the other hand a “put” option will see its options price rise as stock prices plunge.

The next question is: How can we estimate the movement of the stock market?

“Investors should look at these volatility segments which will provide better guidance and the necessary analysis”, said Aaron Sim, the Founder and CEO of Wealth Mentors. “The conventional method of protecting your funds will not be applicable in a highly volatile market. Therefore, traders must be able to hedge their position in a more mechanical fashion.”

In fact, options investors have the advantage when trading in a falling stock market over others who have no protection.

“Another advantage of options is that you can protect your funds through hedging in a highly volatile market. Not only can you minimize your risks, you can possibly profit when you are wrong in predicting your direction,” said Aaron.

“Hedging may sound rather complicated for beginners but with the right education, this can be executed through simple mechanical steps,” added Aaron.

Wealth Mentors encourages members starting out, to hone their skills through virtual trading.

“The downturn is most of the time caused by human emotions as I take on more risk,” said Aaron. “This happens after I have captured the profit which allows me to take on more risk than usual. But beginners take more risk even before the profit comes in. Such downturns hurt  their confidence.”

“That is why virtual trading provides a safe haven for newbies to practise.  Human emotions must be dealt with and it is useful for traders to explore their emotions and familiarize themselves with the rules during virtual trading.”

Investors, especially beginners, might think it is not a good idea to enter the  market when it is falling, but Aaron and Mirriam are thinking outside  of conventional wisdom.

“It is always a good time to enter the market,” said Mirriam, “but it is important to get educated and prepare ourselves for more challenges. Individuals have to understand the market sentiments which cause high market volatility.”

“The market is not a place for individuals who are just pouring in their money without a step-by-step trading plan. Before taking up a trade, you must already calculate your numbers to know when and how much to exit”.

“The stock market is a good place to generate wealth, be it in the bull or bear market, but the investors need to be informed.” Mirriam concluded.