Have you ever thought about turning your spare time into extra cash? How about investing as a side hustle? While the stock market can seem intimidating to beginners, this article breaks down how to start building an investment portfolio, manage risk, and develop a patient, long-term approach to investing with confidence.
We’re all facing tighter times, and stretching salaries to cover essentials often trumps comfort or building future wealth.
More than half of Mzansi’s working, metropolitan households are utilising multiple income streams to reach their goals and maintain their lifestyles. Whether from selling skincare products, creative pursuits like professional makeup and cake decorating, or even reselling preloved finds, the side hustle is no longer a niche concept; it’s mainstream.
Enter investing as a side hustle
If you’re interested in a side hustle but don’t have the time or mobility to balance an entire second job, investing may be for you. The premise is pretty simple. You gather some disposable income, create an investment account, do your research, and act accordingly. Bam! Instant income, right?
Not so fast.
Building a side hustle through investing isn’t about overnight wins and quick money. A recent Standard Bank Power Hour webinar by investing guru and Just One Lap founder, Simon Brown, shatters this fantasy, offering a reality check for aspiring traders. Simon says investing as a second income is more akin to a skilled craft than a get-rich-quick scheme.
The biggest hurdle? You. Mastering your psychology is crucial. The markets can be a rollercoaster, and it’s easy to get caught up in the excitement of potential gains or the fear of losing money. Discipline and risk management are your best weapons. Accepting losses is part of the game, so leave your emotions at the door.
Keep it simple: focus on the story
When you start going to the gym, you don’t immediately squat 120kg. When learning to play the guitar, you wouldn’t start with the Red Hot Chili Peppers’ Knock Me Down, right?
Equally, overcomplicating your investment strategy or aiming too high too fast is one of the worst ways to begin your investing side hustle. Instead, focus on understanding the “story” behind a company. What are the company’s prospects? Is it operating in a growing industry? By understanding the company’s fundamentals, you can make more informed decisions about where you plant your money.
Risk management: the 2% rule
Managing risk is one of the cornerstones of sound investing. Simon introduces the “2% rule”, which suggests that you should only risk 2% of your capital on any one trade. This helps to protect you from significant losses if the market moves against you.
Simon acknowledges that the 2% rule can be challenging for investors with small portfolios. However, he advises against ignoring risk management altogether. Instead, you can start small and gradually increase your investment amount as you gain experience and confidence.
Exchange-traded funds (ETFs): a beginner-friendly option
For those who prefer a more passive approach, ETFs could be the way to go. An ETF tracks a basket of different shares, offering instant diversification and reducing risk. Low-cost ETFs that track major stock market indexes could be your best bet.
The power of patience: long-term trading wins
Simon’s approach to trading is all about patience. He focuses on identifying long-term trends and holding positions for extended periods. This “lazy trading” style avoids the stress of constant buying and selling. Even legendary investors like Warren Buffett have made most of their wealth from just a handful of companies. Time usually takes care of the rest, so be patient.
Learning from mistakes: embrace losses
It’s important to remember that even the most experienced investors make mistakes. The key is to learn from your losses and adjust your strategy accordingly. By keeping a record of your trades and analysing your performance, you can identify areas for improvement and act appropriately in the future.
So, to recap…
Start small: begin with a small amount you can afford to lose. This minimises the sting of potential losses and lets you learn without breaking the bank.
Strategise: develop a clear strategy for entering and exiting trades. This could be based on technical analysis (chart patterns and indicators), fundamental analysis (a company’s financial health and industry trends), or both.
Focus on longer timeframes: weekly or monthly charts allow for calmer analysis and less pressure.
Embrace the boring: good trading is often uneventful. Focus on the process and avoid chasing the emotional highs and lows associated with rapid price movements. When it comes to investing long term you want to be a stoic chess player, not a frantic gambler.
“Set achievable goals that prioritise small, consistent wins.”
– Simon Brown, Just One Lap
Remember, this is a side hustle, not a shortcut. Treat investing like learning a new skill; one that requires dedication and practice. With time and effort, you too can turn your spare time into a profitable trading venture.
Ready to get started?
Anyone can build a successful investment portfolio and turn their spare time into a valuable income stream. But remember: this article only provides a starting point. Before investing any money, it’s crucial to do your research and understand the risks involved. Consider consulting a financial advisor for personalised investment counsel.
And if you haven’t already, download the updated Shyft app today, refer your squad and we’ll top you each up with R100 after each friend’s first successful transaction to fuel your global investing adventure!
*The views and opinions shared are for informational purposes only. They are not intended to serve as investment advice and do not represent the views or opinions of Standard Bank. This information should be used as a starting point for generating investment ideas, and should not be relied upon as the sole basis for making investment decisions. The Standard Bank of South Africa Limited will not be responsible for the results of any investment decisions made based on the views provided.
