- Selecting stocks : Highest level of time and resources requiredIf you are extremely experienced in investing, stocks would undoubtedly be a good fit. But then you would have to take the initiative to research beforehand, in order to set up a truly-suit-you-portfolio which may include stocks, bonds or other securities. You can have full control over your investment, but the only drawback is amateur investors might not have the ability to perform the mix-and-match due to lack of experience, not to mention beating the market. First and foremost, opening an account would open the door to buying stocks. While we can either go to a broker or bank for setting up, the custody fee is cheaper in broker than that in bank, thus it’s more catered to investment newbies’ needs. The setting up process is a piece of cake – we only have to register personal details such as name, HKID and other identity proof! We would also have to transfer at least HK$10,000 from our bank account to broker/bank, and Hooray! You can now invest in stocks. The reasons for the highest level of time and resources are, investors would have to do this on their own in order to beat the market, hence this explains the highest level of devotion. Besides, if we haven’t made our risk tolerance crystal clear, there may be circumstances where we feel overwhelmed by the market volatility. Most importantly, our decisions would be negatively impacted when our cognitive biases come into play. When you have made up your mind to go for stocks, you can implement a well-balanced portfolio that matches your risk tolerance. Moreover, try to pinpoint your underlying problem through finding out where your cognitive biases unveil.
- Selecting fund managers: Moderate level of time and resources required
Investors decide independently on the type of mutual fund to be executed. This indicates that the funds are managed by professionals, while the only thing that we have to do is to compile a certain amount of capital to sustain the pre-selected fund amongst few investors. A single fund can comprise different assets that you agree on, and having other investors share your burden can totally diversify risks.
First thing first, setting up an account is still your number 1 thing to do. Investors can feel free to choose from a number of institutions such as Fidelity or Vanguard Hong Kong. Yet, there are some little challenges worth mentioning – although professionals are managing your accounts instead of doing it on your own, the action of selecting an ideal manager could still be influenced by your cognitive biases. Besides, the hidden obligatory costs for hiring managers might top your earnings.
To minimize the impact brought by your evil biases, you can go for a diversified portfolio that hopefully covers the risks and negative influences. You may also understand the fee for each fund, in order to prevent an unreasonably high expense.