How Can You Passively Invest In The Stock Market?

My new year's resolution is to simplify - cut down on things I have to do so I can free up time for things that increase my knowledge or earnings.

For stock investors, that normally means investing in pooled funds (like UITFs and MFs) rather than directly investing in or trading stocks.

That's not the only way though. And for people like me, who either like direct stock investments or somehow find it more profitable, there's a way to do so without having it take up too much of your time.

So if you're a full time employee (or a busy freelancer) but want to invest in stocks directly, how do you do it?

Invest long-term

It's a common advice. But for would-be passive investors, it's necessary first step.

For day traders or those who look to profit in days, weeks or maybe even a couple of months, direct stock investments can be a time-consuming if not altogether stressful endeavor.

Think about it: if you need to profit in 4 weeks for example, then you're reading up all the news and looking at trends pretty much every day.

But if you need to profit in a year or so, you can comfortable just setup reminders and can virtually ignore most news items (except really major ones or those about the quarterly financial reports).

Be very selective

No matter how long-term you invstment horizon is, you'll still be pretty busy if you're buying 20 or so stocks. In my personal opinion, even 10 is a bit much though that maybe just me.

It's important to be diversified, but holding too many will either take up a lot of your time or might lead you to not know your investment too well. And if you're the one making the final decision to buy or sell, it's pretty important to be as confident as possible.

For me I settled with just one stock, while most of my portfolio are in pooled funds. A different combination will probably work for others.

Buy Blue Chips

At the most basic, buying blue chips rather than speculative stocks will save you a lot of time (and maybe stress) since their prices don't move as wildly.

Use Off-Hours orders.

You probably went through this the first time you directly bought stocks - I know I did. You're practically glued to the PSE ticker; its probably in a small window in the corner of your computer.

But at least for me, there's usually no buying or selling activity. And over time, I found out that it's more convenient to just let the market play out and take 5 minutes at the end of the day to figure out what happened. It's usually safer for me too, since I don't get caught up in the emotional highs and lows of the market, preventing me from making some bad trades.

So Off-hours orders will work just fine for me.

Analyze during free time only

It's pretty hard to make sense of the market during the trading day. And with a long-term investment horizon, you don't really need to. 

You can look at graphs and financial reports during free time (perhaps during long weekends; or bit by bit over the course of your commute, or maybe while waiting in line, etc.) Then you can then set aside maybe an hour every week or month to make sense of what you've read and learned.

of course, you can also "outsource" the analysis - most if not all brokers give stock recommendations, and there's an abundance of facebook groups and forums dedicated to all things stock-related.

It's still best to supplement their analysis with what you know, so you aren't jumping blindly in whatever stock is recommended. But at least a portion of the work is done, and you can simply choose the option that looks best for you.

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photo credit: rednuht via photopin cc

1 comment:

  1. Your idea about off hours order is great. I think I should the same.

    You are right. It is tempting, for me to buy, when the market is open specially when you see that your selected stock is in low price.

    I think I will do the same. That's better I guess. Many times I bought shares because I found The prices to be low. It's more of emotional way of buying :-)

    Thanks for the tip!