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The democratization of finance is a welcome shift in the world of banking. More people have access to easy-to-use financial tools and services than ever before and most of those tools conveniently fit into an app on our smartphones. In this context, individual trading has become a common practice. But does greater access come with greater responsibility?

Just like having a fully equipped kitchen doesn’t make you a master chef, having the right financial tools and ‘simplified’ financial advice doesn’t make you an expert investor. The truth is that easier access doesn’t always translate to better performance, and oversimplified investment advice comes with significant risks.

Trading showing loses

Many new investors have learned the dangers of hasty decision making the hard way. Recent research highlights a clear link between a lack of experience and poor performance. Here are the uncomfortable facts:

  • 70-75% of today’s individual traders, who buy and sell stocks for their personal accounts, end up losing money.*
  • Despite their initial enthusiasm, most day traders only manage to sustain consistent profits for a short period, with most quitting within two years.*
  • The average individual investor underperforms the market index by 1.5% per year. Active traders, who frequently engage in buying and selling activities, face an even larger performance gap, underperforming the market by 6.5% annually.*

Since brokerage houses often nudge us towards certain investments, they may share some responsibility for poor performance. But it ultimately falls upon us to think critically and make informed choices.

Why do most individual traders lose money?

Misdirection and adrenaline.

Inexperienced traders often make snap decisions based on what catches their eye, rather than on sound investment principles. Trading often becomes a game of adrenaline highs rather than a learning curve.

Higher trading frequency.

Individual traders have a knack for trading with more frequency. This herding effect usually serves to fatten the wallets of brokerage houses more than those of the traders.


Typically, the portfolios of individual traders are 1.5 times more concentrated than recommended. While concentration can be a quick route to accumulating wealth, it’s often a high-stakes gamble where the house usually wins.

Lack of strategy.

Finally, the portfolios of many individual traders resemble less a well-crafted investment strategy and more a hodgepodge of hasty bets. They often overlook time-tested best practices in asset allocation and market timing.

Two ways to minimise the risk when trading.

If the facts make you question your conviction about investing, hold on. It’s not all grim news. The facts paint a scary picture, but also help us identify better ways to approach the market.

1. Trading by yourself? Don’t rush.

If you think of investing as a long-term strategy for success, you’ll immediately see why you shouldn’t rush. A better understanding of investing can increase your chances of success. And it’s essential that you take your time.

Conduct research.

Take the time to build a strong and unbiased case for each investment. Conduct thorough research, analyse financial statements, assess market trends, and understand the potential risks and rewards.

Consider the long-term.

Take the time to understand how each investment fits with your current investment strategy and long-term financial plan. Does the investment align with your goals and risk tolerance? How does it impact the diversity of your portfolio?

Listen to multiple points of view.

Take the time to find viewpoints that challenge your assumptions. Engage in discussions with financial experts, join investment communities, and read reputable sources to gain diverse perspectives that can help refine your investment decisions.

By investing a relatively short amount of time, you can deepen your knowledge, make better investing decisions, and reduce the likelihood of falling into common investment pitfalls.

If you want to boost your investment skills and learn effective risk mitigation strategies, consider exploring Alpian’s Kickstarter Guide or enrolling in our Masterclass. These resources provide practical tips and real-world insights to help you successfully navigate your investing journey.

2. Invest like an expert with an investment mandate.

An investment mandate is a set of instructions that guides a wealth advisor in making choices and actions for a pool of assets. Digital private banks like Alpian make it easy to implement an investment mandate tailored to your needs and goals.

Alpian provides two types of investment mandates: Advisory and Discretionary.

Advisory mandate.

An investment mandate in which the client makes the ultimate buy and sell decisions while their financial advisor gives them advice and recommendations based on their risk profile and financial objectives.

This is a tailored service generally provided by a person or a team at a private bank, an advisory boutique or an investment management firm.

Discretionary mandate.

An investment management mandate where the client delegates the management of his portfolio to an investment professional. The purchase and sales are then executed by the investment professional at their discretion.

Usually, investments are not customized for specific clients. But in a discretionary mandate, the portfolio manager builds and follows a strategy tailored to their client’s risk profile and financial objectives.

Whether you go with one or the other, investing with a mandate managed by experts comes with distinct advantages:

Professional guidance.

A team of experienced financial advisors can provide personalized investment advice that considers your unique financial goals, risk appetite, and time horizon.

Two men discussing business
Portfolio diversification.

By creating a well-diversified portfolio that spreads risk across various asset classes and investment opportunities, an experienced wealth advisor can help optimize returns while minimizing potential losses.

Active risk management.

With an investing mandate, experts can actively monitor market conditions and adjust investment strategies accordingly, helping to protect your capital during turbulent times.

Transparent reporting.

A wealth advisor can provide regular reports on your portfolio’s performance, enabling you to assess progress and make informed decisions based on real-time information.

Historically, the financial services offered by wealth advisors have been prohibitively expensive and inaccessible for most. But the shift towards democratized banking has seen a rise of accessible digital private banks like Alpian.

With all the advantages listed above, Alpian’s “Managed by” and “Guided by” solutions can help you achieve your financial goals. Schedule a call with a dedicated advisor for a personalized consultation where they assess your needs and guide you through the process of implementing a tailored investment strategy.

Learning by doing.

Remember, investing can be a powerful tool in your financial toolkit. But like any powerful tool, it pays to proceed with care and caution to make it work the right way.

Taking proactive steps to improve your knowledge of investing and seeking professional advice can significantly improve your chances of achieving financial success in the long term.

If you found this article insightful and are eager to further improve your trading and investing skills, don’t miss our next piece, “Investment mistakes: If only we could see the future.” Discover common pitfalls and how foresight—or the lack thereof—can make or break your financial journey.

*𝘚𝘰𝘶𝘳𝘤𝘦: 𝘌𝘚𝘔𝘈, 𝘍𝘊𝘈 𝘣𝘢𝘴𝘦𝘥 𝘰𝘯 𝘥𝘦𝘳𝘪𝘷𝘢𝘵𝘪𝘷𝘦 𝘵𝘳𝘢𝘥𝘪𝘯𝘨 𝘢𝘯𝘥 𝘷𝘢𝘳𝘪𝘰𝘶𝘴 𝘱𝘢𝘱𝘦𝘳 𝘳𝘦𝘴𝘦𝘢𝘳𝘤𝘩 𝘧𝘳𝘰𝘮 𝘉𝘢𝘳𝘣𝘦𝘳 𝘢𝘯𝘥 𝘖𝘥𝘦𝘢𝘯

About the author

Driven by a need for clarity and simplicity on all things wealth related, the i-vest team works closely with senior financial experts and advisors to dive deeper into the world of finance, investment and wealth to make it more relevant for you.

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