The Winning Strategy: Avoiding The Punting Trap
The Winning Strategy: Avoiding the Punting Trap
Investment and punting are two distinct forms of activity. There is science and hardwork behind investing intelligently rather than just punting on your investments. An investor has many options to limit his or her losses. For instance, they can focus on building a solid diversified portfolio to spread the risks that they might incur. Financial downside is limited for the case of investing.
Punting, on the other hand, falls under the speculative area where investors tend to skew towards quick profits – in particular, markets like futures, options and forex.
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Punting is exciting! – But is it beneficial?
Investing is boring but brings tremendous benefits in the long term. Patience is key to snowballing your initial capital into something significant, such as the ability to fund for your child’s tertiary education 15 years down the road. Investing is supposed to be dull and unexciting, where one collects regular dividends or interest payments from the investments and proceeds are reinvested at regular intervals.
But punting is exciting. It gives a person adrenaline rush but does not contribute to long term wealth accumulation. The prospect of doubling your capital in a day has lured many investing community into a gambler’s mindset and engaging in high tempo speculative trading.
Investing should be approached with a risk-averse mindset, holding on to your investments over 6 months or more and averaging out the returns of all winners and losers in a portfolio.
Checking your trades every minute can be a huge distraction to your day job or career. One should not engage investing with a punter’s mindset that will jeopardise your emotional health, where depression kicks in when a bet went against you.
The Investor Mindset: Diversify, Diversify, Diversify!
It is the mindset of a person approaching investing that separates winners and losers. Investing requires diversification, which is not putting all your eggs in one basket but instead spreading your investment capital into more financial instruments, like alternative asset classes other than the usual stocks and bonds.
Having a punter’s mindset would rob you of your financial goals via investment, which is loosely defined as deferring consumption now in order to have higher purchasing power for consumption in the future. In other words, by rejecting the temptation to splurge on a brand new smartphone right now, the cash saved could be used to earn a return via investing in stocks which would enable you to afford a newer model smartphone plus some spare cash for reinvestment.
A punter’s mindset to investing is putting all capital into one investment, then proceeding to pray hard every single day that prices would skyrocket. Imagine if this one investment failed you, then you’ll lose everything you have.
To avoid a complete loss, it is important to spread your capital amongst many investments – best if in different asset classes to build a more solid diversified portfolio.
The Balancing Act: Risks vs Returns
Putting all funds into fixed term deposit may be too passive particularly for professionals at the age of 30 to 45 who have a good 20 years of working life ahead. A typical 6-month fixed deposit offered by major local banks offers interest returns from 1.25% to 1.5% while investors are able to participate in campaigns on Moolahsense that offer an average of approximately 15% risk-adjusted rate of returns.
By exploring all avenues for investments, investors can build up a solid diversified portfolio, and not just relying only on the low risk low interest fixed deposits. Being too greedy and risking all capital on financial instrument perceived to be the one will have dire consequences for your financial profile.
The money making rule is do not lose money. Learn the game you play, diversify your portfolio, and definitely balance your risks and returns.
So… How do we Invest?
By having the discipline to put in place diversification safeguards to your investment capital, one would qualify as investing intelligently and not gambling away recklessly. By doing sufficient due diligence on the investment merit of a financial product and researching all legitimate platforms for investments, one would qualify as investing rationally and not falling into the punting trap.
Diversification and spreading your risks is the key factor for investing and helps you stay away from the temptation of punting. We should be risk-averse and shouldn’t chase for that ONE big win and focus on a long term plan.
The objective of MoolahSense is to provide alternative investment opportunities for investors who are looking for investable financial instruments, or seeking to diversify their portfolio from traditional stocks and bonds.
Our campaigns are updated on daily basis to ensure that investors have an abundant of opportunities to diversify their portfolio.
Besides, our platform allow you to start investing in campaigns with just $100. That means if you just have S$1,000 investable capital, you can still easily and efficiently spread your investments into 10 separate campaigns, achieving optimal diversification.
You also have the flexibility to choose the duration of your investments, where funds could be locked in for only as short as 3 months to as long as 24 months. Currently, the average maturity period of our campaigns is 12 months.
You can assess your individual cash flow needs before committing to any single campaigns with the transparency of investment periods. Multiple campaigns are available with differing returns and business fundamentals.
Plus, it’s easy to invest from the comfort of your home – all you need to do is to sign up for an account on our website and start taking charge of your financial destiny!