Trading in Global Markets: Insights from the industry experts


Never has there been a time where it has been easier to make money. Or to lose it.

Trading in global markets labels you as an 'investor' in the Cashflow Quadrant. And it's a passive income strategy that has the potential to grow or deplete your wealth in a relatively short amount of time. It is a risky business by nature, but by adhering to the wisdoms learned and shared by industry experts and the wealthy, you can create a safety net to help mitigate some of the risk.

Risk is perhaps one of the most important reasons why South Africans are opting for global market trading: diversifying assets beyond our own borders in countries with stronger currencies provides a measure of protection against a weakening South African rand and a political atmosphere which, more often than not, seems to be heading for a total meltdown. That, and the fact that exchange control regulations have relaxed.

So, if you're planning to trade in global markets to bolster your passive income, absorb these pearls of wisdom from those who carry a little more experience...

Know your investment fees upfront

"Costs need to be at the forefront of the decision-making process, they can really eat away at returns, which no one wants no matter their income level," says Scott Keller, a principal at Truepoint Wealth Counsel.

Whether your trades are short term, or whether you decide to weather the long-term ups and downs with the aim of steady growth, there are fees and taxes to be paid everywhere. The fees you pay depend on the type of trade, who makes the trade (e.g. brokerage fees), and where the trade is made (e.g. currency-related fees).

Don't listen to the experts

"Anything can happen anytime in markets," writes Warren Buffett. "And no advisor, economist, or TV commentator – and definitely not Charlie nor I – can tell you when chaos will occur. Market forecasters will fill your ear but will never fill your wallet."

This relates to another strategy espoused by Mr Buffett in this video below:

"What we think about, is how much is it selling for, how much do we think it's worth."

Mr Buffett goes on to say that he never looks at the price first. Instead, he reads the company report, then decides whether the price of a given stock is reflective of the company's value. The sentiment of his statement is echoed by many other investors: it's a head game, not a heart game.

Approach trading like a business

It is important to understand that trading is a business. You may be working from home, you may be trading in global markets wearing little more than your drawers, but it doesn't change the fact that success is predicated on mindset, and the business-like mindset is the one most geared to make money.

Successful trading requires a strategic approach that covers both short-term and long-term goals, the amount of money available, what you will be trading and how it will be traded. All of these criteria should be researched and (preferably) tested against historical data. Subsequent periodic testing against historical data and in a live trading environment ensures the long-term viability of your trading business.

"You get more money for taking more risk, that's how it works, but you need to know what you are comfortable with losing," says Mindy Rosenthal, president of the US-based Institute for Private Investors.

Don't put all your eggs in one basket

The wealthy know all too well that there's a correlation between risk and a lack of diversity. When trading in global markets, diversify your investment. This doesn't mean simply investing in more than one company, but also in different companies. Nor does it mean investment in one type of stock, but rather diversifying your portfolio to include different types of assets.

Similarly, for those familiar with the Cashflow Quadrant®, it's better to be in at least two or three, or all four quadrants, at the same time, rather than investing all your energy and financial resources in one.

Track your progress

In life we often fail to make progress simply because we fail to acknowledge our progress. The same rings true when you trade in global markets; it doesn't matter how much money you make or spend – the important thing is how much you keep.

Today, a multitude of tools exist to help you keep track of your net worth. The benefit is that this provides you with an objective view of your finances – how much is coming in, and how much is going out.

“If you buy things you don't need, you will soon sell things you do need.”