You CAN make stocks work for you… but these are the three things you need to keep in mind, writes VICKY REYNAL

I love dabbling in stocks and shares. I’m a real beginner, but I want to make money in the short term. For example, I just sold some shares to pay for my holiday flights in February.

But friends and family keep urging me to play the long game and hold the investments for years instead of weeks. They say I’m a real amateur not to realize this. What do you think?

LM, via email

Money psychotherapist Vicky Reynal answers: There are three questions I ask people when they tell me about their investments: Are you fully aware of the risk you are taking? Are you aware of the emotions that determine your choices? And does it fit into your broader strategy and plan? If the answer to all three questions is yes, then you have the counterarguments to allay your family and friends’ concerns about your short-term trading.

But if any of these questions are a negative answer, there are dangers to consider. Let’s look at them one by one.

It is always worth considering whether, beyond the obvious reasons why we invest (to grow our wealth or to make some quick money), there are underlying feelings that we are trying to convey through behavior to grab.

People become addicted to trading because it gives them a rush that feels good, as opposed to an emotional dullness or sadness that they are afraid to face.

Still others might invest because it gives them a sense of control at a time in their lives when they are facing uncertainty.

If you’re usually conservative with money and you’ve noticed that you’ve been willing to take a lot of risk lately, this could also be a sign that something emotional may be going on. Have you thought this through or is there a part of you that is trying to sabotage your finances?

If you’ve ruled out emotional motivations and it’s really about the money, you need to check that you fully understand your level of risk.

What your family and friends may warn you about is the fact that investing with a short-term horizon carries higher risks because stock prices are more volatile in the short term. Even experienced investors can lose money by trading short term. term.

Once you are clear about the risks, ask yourself whether this amount of risk matches your risk tolerance. And here I’m not just talking about how much money you can afford to lose, but how much money you can tolerate losing.

People can vary greatly in how they respond to losses, and even the same person can be resilient to risk and loss at one stage of life and respond very differently at another stage of life.

You’ve had good results so far, but what happens if the next time you rely on holiday pay through a transaction, the value of your shares suddenly drops?

How would it feel if at the time you needed the money, the value of your shares is particularly low, making it a bad time to trade?

I’ve heard of people who resorted to borrowing money from family and friends because they were counting on paying the tax by selling their shares, and felt trapped when the value of the one share they had invested in went up in January. was at a low point.

Try to imagine what that would feel like for you.

As a beginner, there may be things in the fine print that you may not have thought about, such as the fees you pay if you trade regularly.

It is a must to educate yourself on all the pros and cons of this strategy so that you don’t feel blindsided later.

And finally, do you have an overall strategy for growing your wealth and how does this trade fit into that? Ideally, you will have a plan for your future finances that includes both long-term investments aimed at growing your wealth and short-term trading.

It sounds like your friends and family are concerned that you are only focused on short-term wins and not planning for the future.

The ‘long game’ that your friends and family recommend is based on the fact that long-term investments in diversified stocks have historically delivered positive returns: they are not affected by the short-term volatility of the markets, but moreover they benefit from compound growth – in essentially a snowball effect of returns – which you miss out on if this is your only form of investing.

I think it’s tempting to let your recent wins be proof that you’re right, but you told me you’re new to this.

When investing, it is crucial to be humble, curious and understand the risks.

Your friends and family try to warn you about the risks of a short-term strategy and the missed opportunities if you use it as a substitute for a long-term strategy.

• Do you have a question for Vicky? Email: vicky.reynal@dailymail.co.uk