It’s something that we all have to think about at one point or another in our lives: how exactly to fund our retirement. When it comes to growing wealth for the future, there are many strategies that people employ, each with their own pros and cons, and each with different track records of success.
Some people try saving their money in a bank, hoping that the interest they accrue over decades will add up to enough to underwrite a comfortable life in their sunset years. Others buy a house, or a series of properties, betting on favorable real estate market conditions to increase the value of their holdings. Still, others put their faith in retirement accounts, using them to purchase assets meant to be held over the long term. However, there is another option often overlooked by those trying to accumulate enough money to underwrite their golden years: trading.
Trading stocks, exchange-traded funds (ETFs), options, and commodity and financial futures can help you earn more money and reach your financial goals faster than any of the other methods listed above. In this article, we will explore why trading might be the best choice for you to grow your wealth, accompanied by insights and analysis from Matt Choi, a Chartered Market Technician, wealth coach, and the founder and proprietor of Certus Trading, a noted Canadian trading education company.
What is Trading?
To begin, it might be helpful to define what trading is. Trading is the umbrella term used for buying and selling assets like stocks, ETFs, options, and futures in order to make a profit. Unlike investing, which usually means holding onto assets for a long time and cashing them in after years or even decades of waiting, trading involves more frequent buying and selling. This can be done daily, weekly, or monthly, depending on your strategy. “Trading offers a host of advantages over simple buy-and-wait investing,” says Matt Choi. “For instance, it allows you to capitalize on short-term market movements and adjust your positions based on real-time information. Trading is a much more active, dynamic, and elastic method to grow wealth.”
Higher Potential for Returns
Trading can offer higher returns compared to traditional savings or fixed investments. For example, if you buy a stock at a low price and sell it at a higher price on the same day, you will make a profit. You can then use those profits to immediately reinvest in other assets, and repeat this process as many times as you see fit. The same goes for ETFs (which are like baskets of stocks), options (which are contracts to buy or sell stocks at certain prices), and futures (which are agreements to buy or sell assets at future dates). Armed with the right knowledge and strategy, savvy traders can make higher gains than passive investors. “At Certus Trading, we employ a comprehensive approach to trading education, utilizing a suite of instructional tactics designed to be more effective in bringing in returns than traditional savings or fixed investments,” asserts Choi.
Flexibility
Trading allows you to actively control your investments, meaning you can choose when to buy and sell them based on the most current market conditions. This flexibility can help you take advantage of opportunities as they present themselves in real time, and also avoid accruing losses by reacting quickly to unexpected dips in the market. Unlike real estate or long-term investments, you’re not locked into holding onto your assets for years. “Trading gives you the ability to respond swiftly to market changes,” says Matt Choi. “Long-term investments or real estate can act as something of a millstone, limiting your ability to respond should the markets take a downturn, whereas a key feature of trading is the exact opposite. With a few exceptions, you can easily get rid of or exchange your assets in almost no time at all.”
Diversification
Trading lets you spread your money across different asset types. You can trade stocks, ETFs, options, and futures all at the same time. This diversification is key, as it helps you reduce your risk because you’re not relying on just one type of investment to grow your wealth. “The general consensus is that hedging is one of the true cornerstones of any successful financial strategy,” explains Matt Choi. “By spreading your investments across various asset types, you can protect yourself against significant losses in any single market.”
Trading Compared to Other Strategies
Saving money in a bank account is safe, but the interest you earn from the bank is very low. Over time, the value of your savings might not keep up with inflation. Trading, on the other hand, has the potential to grow your money much faster. Buying a house or other properties can be a good investment, but it requires a lot of money upfront. It’s also not very flexible because selling property can take a long time. With trading, you can start with much less money while retaining the flexibility to buy and sell assets quickly. Retirement accounts are great for long-term savings because of their many tax benefits. However, the returns they bring in are often limited because the investments contained within them are often less aggressive. Trading can serve to complement these accounts by potentially providing higher returns in a shorter time.
Conclusion
The best way to grow wealth for retirement depends largely on the individual in question—their willingness to learn about finance, their tolerance to risk, and the degree to which they would like to participate in the process. If you enjoy learning new things, are not too risk-averse, and would like to take the reins of your financial future (as opposed to passively leaving it in the hands of a brokerage or bank), trading might be a strategy worth considering. With the potential for higher returns, flexibility, and the ability to diversify, trading offers many advantages for growing wealth and ensuring you have enough money for a secure and worry-free retirement.
