Most serious investors would love to make smarter trades. If you buy just a little bit lower with every trade, or sell just a little bit higher, your profitability could increase significantly—and if you get good enough, you might even be able to make a full-time career out of day trading. At the very least, you’ll be able to retire young with plenty of money in the bank.

But the reality is, most investors end up taking a passive role, investing in index funds or blue chip stocks and seeing decent—but never stellar—returns. Their trades are average, and they see average returns. There’s nothing wrong with that, but if you ever hope to become better, you’ll need to learn what challenges are holding you back—and how to overcome them.

Most Common Challenges Preventing Better Trades

These are some of the most common things holding investors back from making better investment decisions:

1. A refusal to take initiative. Some traders simply aren’t motivated to make better trades, or otherwise refuse to take initiative. They talk about how much they’d love to learn about investing, or how much money they think they could make from the stock market, but that talk is unproductive; it’s only worthwhile if it leads to some meaningful action or work that leads them to a goal. Without the motivation to succeed, you’ll never pursue the experience and assets that can help you get there.
2. A fear of losing money. All investments carry some degree of risk. Generally speaking, the higher the risk, the higher the potential return. Making smarter trades often means learning how to balance that ratio of risk to reward, and occasionally pursuing investments that stand to lose you significant capital—in exchange for a strong possibility of earning significant capital. Some investors get nervous the moment any significant risk is introduced, so they close themselves off from entire branches of investment opportunities. If you want to make more profitable decisions, you need to be willing to lose some money in the process.
3. A lack of capital (or other resources). You don’t need a massive sum of capital to make better investments, but it certainly doesn’t hurt. If you only have $500 to invest, you’re not going to have nearly as many options or as much buying power as someone with $500,000. You won’t be able to make high-frequency trades, you won’t be able to diversify your bets very much, and you won’t see as much of a return on the investments you’re most confident in. Unfortunately, there’s no easy way to compensate for this, other than by building your personal wealth and access to resources.
4. A lack of time. Some people never beat the market—or make an attempt to beat the market—simply because they don’t have the time necessary to fully research their decisions. If you want to make the smartest decision possible, you need to know several factors, including historical prices, industry trends, consumer buying decisions, the nature and history of the leadership in place of a company or asset, and tons of numerical factors. It’s not hard to learn how these factors relate to each other, but it takes several minutes to a few hours of research—and not everyone has that time to spare.
5. Distractions with hobbies or other goals. Finally, some investors haven’t made investing a priority. They’re busy thinking about how they’re going to advance their career, how they’re going to spend time with their families, or they spend time working on other hobbies. There’s nothing inherently wrong with this, but it is going to prevent you from making the best possible trading decisions. Unless investing is a significant priority in your life, you’ll never be able to make the most of it.

Is High-Intensity Investing Worth It?

There are many types of financial goals to have, and no two individual investors should have the same goals (or the same strategy). If you want to improve your ability to make high-volume, high-intensity trades, you can easily improve your abilities. But for some investors, the passive role is a better path; it demands less time, it’s less stressful, and you’ll still be able to earn a substantial return. Examine your own goals, capacity for risk tolerance, and priorities in life, and you’ll quickly understand whether this approach is right for you.

Categories: Stock Market