By Adam Lambert, Managing Director, Zimtra Asset Management
August 23, 2023
Zimtra's Managing Director, Adam Lambert, shares profound insights in an illuminating feature for Medium.com and Authority Magazine. This comprehensive article delves into the intricacies of smart investing, dissecting the core essentials that underpin successful investment strategies.
Check out this excerpt of the Q&A:
You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing, what would you say? Can you please give a story or an example for each?
As a finance insider advising my adult child on five non-intuitive essentials for smart investing, I would emphasize the following points with accompanying stories or examples:
1. Trade with someone else's money: One non-intuitive approach to smart investing is leveraging the resources of proprietary trading firms, like Zimtra, that offer funded trading accounts. These firms provide an opportunity for skilled traders to access larger capital without risking their own savings.
Let’s say your adult child is an experienced trader but lacks substantial personal capital to make sizeable trades. Joining a reputable proprietary trading firm allows them to tap into the firm's funds and potentially increase their trading capacity significantly. By managing the firm's money effectively, they can benefit from both their trading skills and the available capital, leading to substantial gains.
2. Find your own “edge” and avoid “get-rich-quick” schemes: The world of investing is highly competitive, and it's crucial to identify a unique advantage or strategy that sets your child apart from the crowd. Avoiding “get-rich-quick” schemes that promise unrealistic returns is essential to building a sustainable and successful investment approach.
Your adult child might discover an emerging market niche that has not yet been fully explored by mainstream investors. By conducting thorough research and understanding the market dynamics, they could develop a specialized investment strategy tailored to that niche. This approach may not provide overnight success, but over time, it could yield substantial profits as the market grows.
3. Be bold and embrace failure (within personal limits): Taking calculated risks is a fundamental aspect of successful investing. Encourage your adult child to be bold and not fear failure, but also emphasize the importance of setting personal risk limits to protect their capital.
Your adult child identifies an opportunity in a high-potential, yet volatile sector. They decide to invest a portion of their portfolio in a promising startup. Despite thorough research, the company faces unexpected challenges, and the investment results in a significant loss. While it's disappointing, your adult child learns from the experience, reassesses their approach, and acknowledges that failure is part of the learning process in the pursuit of greater success.
4. Build a community of like-minded, motivated individuals: Surrounding oneself with a supportive network of individuals who share similar goals and aspirations is invaluable. A community can provide insights, encouragement, and accountability on the investing journey.
Your adult child joins an investment club or an online community of traders and investors. Through regular interactions and discussions, they gain access to different perspectives and strategies. They receive feedback on their ideas, learn from others' successes and failures, and develop a strong support system that boosts their confidence and knowledge.
5. Learn to manage risks and trade without emotions: Successful investing requires a disciplined approach to managing risks and emotions. Setting clear exit targets for winning and losing trades is crucial to maintaining a balanced portfolio.
Your child invests in a technology company with significant growth potential. As the stock price rises rapidly, they set a predefined profit target to secure gains and avoid getting greedy. On the other hand, they also set a stop-loss order to limit potential losses if the investment doesn't perform as expected. By sticking to these predetermined levels and not letting emotions drive their decisions, they can make rational choices and protect their capital in both winning and losing scenarios.
In summary, these five non-intuitive essentials for smart investing can guide your adult child on a path towards successful and sustainable wealth-building. By trading with someone else's money, finding their edge, embracing calculated risks and failures, building a supportive community, and managing risks and emotions, they can navigate the complexities of investing and increase their chances of long-term financial success.