Is it that easy to make money through stock trading?
Trading is a psychology game. Buying and selling stocks in the short term while betting on price movement requires a lot of hard work too. We've heard traders who earn tens of thousands in a very short time and we see these advertisements very frequently on those trading workshops. Some of these workshops even have software to help you trade and make money automatically. It was said this eliminates the psychology aspect and doesn't require much effort on our part. Is it really that easy to make money?
I heard a real life story of a lady who was retrenched during the 2007/08 financial crisis. She was a futures broker in a financial institution for 17 years. She worked mostly from 6pm in the evening to 5am in the morning trading futures market.
After being retrenched, she thought she would be able to trade at home and have time to look after her son. But, within 10 months into trading at home, she lost quite a lot of money and stopped. Why did she lose money? She said trading in a financial institution allowed her to have tips and instant news to make decisions fast. Trading at home is different as most of the time the news is delayed. The second reason is trading an institution money's is different from trading your own money. The emotional and psychological aspect is completely different. Even with the experience and knowledge of trading, it is still highly possible to lose money.
After hearing this story, it made me realise trading is not easy. Firstly, I've heard that most people lose money in trading and it is said that only 5% of the traders in the world can make money consistently. Secondly, I've heard that trading is a psychological and emotional game. If you can't control your emotions, you can't be successful in trading. This point is also confirmed.
So is it still possible to make money through trading? I think it is still possible to make money from trading but it will not be a lot of money. In actual fact, very few people are full time traders. Most trade on the sideline occasionally. You may not agree with me but I've traded before and know what it is like to lose money. It is really an emotional game. Want to make a lot of money through trading? Think again.
What about investing through Crowd lending platforms?
Investing through crowd lending platforms can yield you more than 10% a year. That is a pretty decent return on investment. Wait... some of you may be thinking this sound too good to be true? How can there be such thing as a more than 10% yield on investment? Let's pause for awhile and take a look at how crowd lending works to understand it better.
Crowd-funding is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet. One of the crowd-funding platform for businesses in Singapore is Moolahsense. MoolahSense, as quoted on their website, is “a trusted P2B lending platform that empowers investors to stimulate economic growth by providing finance directly to growth SMEs, in exchange for an attractive rate of interest.”
MoolahSense co-founded by the CEO Mr Lawrence Yong, who has been a practitioner in the financial sector for the past 12 years, with experiences spanning private wealth management and investment banking. MoolahSense has opened up a whole new avenue for us ordinary investors who want a part to play in investing in SMEs in Singapore.
The investment opportunity provided by MoolahSense is essentially a bond-like program where one can lend money to the SMEs and get interest in return on a certain time period – either on a monthly or one-time basis. Only 1 in 20 SMEs get funding from banks even though they contribute greatly in the economy of Singapore. Crowdfunding is a win-win situation for both SMEs and investors. SMEs get the funding they want and investors get the interest in return.
In simple layman terms, when we crowd fund a company, we are lending money to that company in exchange of some interest. We become lenders just like when the bank lends money to individuals, they charge an interest in exchange for the loan.
Crowd Lending VS Stock Trading
Limited Losses
Every investment has its own risks. Stock trading can make you a lot of money but can also make you lose a lot of money. I've heard of people who lost hundreds of thousands of dollars through stock trading. Stock trading like Forex, options or futures is highly risky as we can lose more than the amount we have.
For crowd lending, your losses are limited to the amount you invest in. For example if you invest $1000 and the company defaults on its payment, you will only lose a maximum of $1000. Moolahsense, a crowd lending platform, limits the risks for investors by meeting up with the management of the company, engaging them in investors sessions and in the case of default, they have directors of the individual companies as guarantors and also debt collectors agencies to recover the money.
Timing the market and volatility
As mentioned earlier, trading is a psychology game. Why so few traders are profitable in the long run is because the market is always changing. The market is volatile and is definitely not for the weak hearted. Nevertheless, there are still some successful traders who manage to make money from trading the markets.
For crowd lending, we are essentially just lending to a corporation. The returns are in the form of interest payable to us as we lend to these corporations. In crowd lending particularly, we are lending to SMEs. The returns are predictable so there is no need to time the market or be subjected to the volatility like the stock market.
Fees for buying/selling
For stock trading, there are always fees for each buying and selling transaction. If we only trade with a small sum of money, it wouldn't make sense at all as the fees would have eaten up most of our profits. For crowd lending with Moolahsense, there are no fees charged at all. This is certainly beneficial to investors who just want to invest a small amount of money. You can invest from as little as $1000 in each company.
Crowd lending vs stock trading, which do you think suits you more? There are many different investment products and different ways to grow our money. Diversifying and knowing the risk in investment will help us go a long way.
Check out Moolahsense website to find out more about the opportunities for SMEs funding and investments.
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