Millions of Americans throughout the COVID-19 pandemic have turned to day trading as a way to make money and alleviate boredom. For example, Robinhood reported 4.3 million daily average trades in June 2020, which beat out every traditional brokerage.
At Modest Money, we believe that the majority of inexperienced day traders are going to lose their shirts. Even before the pandemic, most day traders lost money. This is why we recommend the Motley Fool Stock Advisor as a way to start investing for the future with minimal risk attached.
In our Motley Fool Stock Advisor review, we illustrated how effective Motley Fool stock picks are. In this guide, we take a look at how to maximize your profits on that platform.
1. Diversify Your Motley Fool Stock
The Motley Fool has recommended hundreds of stocks over its 25-year history. This makes it difficult for newbies to know what to buy since the majority of users don’t have the funds to buy into all of them.
Diversification minimizes potential risk across a whole portfolio. Firstly, you need multiple stocks to limit your risk exposure. The Fool’s profitable track record is based entirely on its winners outperforming its losers.
For example, in the past, the Motley Fool has recommended both Amazon and Zoom through Stock Advisor. Motley Fool cannot predict or guarantee results and while both investments were massive winners, there’s not a sufficient amount of diversification within these picks.
This is why we strongly recommend beginners split their portfolios between the Fool’s monthly Stock Advisor picks, its Starter Stocks recommendations, and Best Buys guide.
How you split them depends on your appetite for risk, but we recommend opting for 33% each if you have a more conservative bent. Alternatively, if you’re fine with a little risk consider the following makeup:
- 50% monthly stock recommendations
- 25% Starter Stocks
- 25% Best Buys
Ultimately, how you diversify is up to you. Consider your goals and your long-term outlook before making a final decision.
2. Focus on the Long-Term
Motley Fool stock comes with a recommendation to hold it for a minimum of 2-3 years. Unless there’s an urgent reason to sell, we recommend that you hold your stock for even longer than the recommended time.
Take the 2008 crash as an example. The market dropped by nearly 50%, and yet by 2020 the market had almost quadrupled. The coronavirus crash of 2020 saw the market drop by 28% between February and March, before rebounding to smash record highs.
In other words, focus on the big picture and let them run. Feel free to set a stop-loss order if you’re especially risk-averse.
3. Sprinkle in Some Rule Breakers Recommendations
Investors are often torn between Stock Advisor vs. Rule Breakers. While they have the same membership cost, there are some differences in how each program is managed.
The main aspect that sets the two apart is Rule Breakers focuses on high-volatility, high-growth stocks. Stock Advisor, on the other hand, concentrates on more well-known stocks.
To maximize your gains, consider investing a small portion of your portfolio into Rule Breakers. You never know, you might just hit it big!
4. Be Wary of the Motley Fool Chat Room
There’s value to be found in liaising with other investors, but many newbies to Motley Fool Stock Advisor make the mistake of taking what the Motley Fool Chatroom says to heart. These are ordinary investors, and the advice is often unqualified.
Resist the urge to buy, sell, or alter your portfolio based on what other investors say. Those with the best results are those who stick to the recommendations of the program religiously.
5. Avoid Checking the Market Daily
The Gardner Brothers have a tremendous track record of beating the market and making profitable Motley Fool stock picks. Part of their methodology involves picking a stock based on its 3-5 year performance.
It’s not uncommon for many of their stock picks to decline in value in the short term. After all, nobody can predict market shaking events or an economic crash.
Skittish investors are often tempted to sell when the value of their investments drops. Remember, losses are not losses until they are realized.
Avoid checking the market daily and resist the urge to sell!
The Bottom Line
Our Motley Fool Stock Advisor review has always raved about the power of the platform’s stock picks, and that hasn’t changed. It remains one of the few stock-picking platforms that can boast real long-term results.
Yet many investors continue to make the same mistakes over and over again. Follow these tips to not only protect the value of your portfolio but maximize your gains.
If you’re interested in the power of the Motley Fool, create an account now and get 50% off your first year’s membership by clicking on this link.