Zak Westphal: An Interview on How to Invest Your Money Wisely
Let’s say you’ve recently come into a lump sum of money. Maybe a relative passed away and left you an inheritance. Perhaps you finally saved up from your job. Regardless of the source, you recognize this is a chance to put those funds to work rather than waste away in a low-interest savings account.
But where do you even start? It’s easy to feel overwhelmed trying to pick between different options - stocks, bonds, mutual funds…even cryptocurrencies. It's intimidating trying to sift through the noise as a total beginner, and this can very quickly lead people into making costly mistakes.
That's why we sat down with Zak Westphal, founder of the investment and education platform StocksToTrade. As an aggressive penny stock trader for over a decade, Zak Westphal knows firsthand the exhilarating highs and gut-wrenching lows the market delivers. He has made it his personal mission to equip retail investors with the tools and knowledge to take control of their financial futures, in this interview he will share some universal investing principles useful for newbies and experienced traders alike.
Q: What’s the biggest mistake you see people make when first getting into investing?
By far the biggest pitfall I see for newcomers to investing is lack of education. People hear stories of others striking it rich, and hunger for similar huge returns fast. Whether it's pumping meme stocks, chasing crypto 'moonshots' or going all-in on penny stocks, they take on way too much risk without proper training. They don’t take time to understand portfolio allocation, position sizing, risk management or even fundamental analysis. It’s like trying to launch a space shuttle without physics or engineering fundamentals.
My advice is to get grounded in core investing principles before allocating real capital. Understand basics like why diversification matters, how compound growth works over long periods, and how to assess a company's financial health. With that knowledge foundation, you can then tactically select assets aligned to secular economic trends and your personal risk tolerance.
Q: How can the average investor tell the difference between a legitimate opportunity versus a “too good to be true” situation?
If it instinctively sounds too good to be true, it almost always is. But more fundamentally, take time to deeply research any new investment situation before allocating money. Understand the company or asset behind it, its real track record over time, and whether values align with logical growth projections. Check multiple credible sources - don't just rely on hype from one place.
Legitimate opportunities with strong fundamentals may sound exciting, but they are grounded in reality. The story behind the investment checks out. Growth and profitability metrics make sense. The leadership team has real expertise ideal for the opportunity at hand. Do your homework across all these areas before jumping into the latest hot trend.
Q: What markets are best suited for part-time and beginner investors?
For those investing on the sides of their normal job or just starting out, I always recommend looking at broad index ETFs first. These bundle together entire market sectors or indexes, giving you instant diversification without picking individual stocks. Index ETFs allow upside exposure without single company risk. As your experience and available time to research grows, you can begin tactically selecting stocks in growing industries aligned to economic megatrends.
I'm a big believer that part-time investors can absolutely achieve solid returns over time. By leveraging broad market ETFs initially, you set the stage for sustainable growth. Then allocate a portion of funds to concentrated stock picks as your conviction level in those opportunities grows higher over time.
Q: How do you prevent emotion from overriding your investment decisions in volatile markets?
Controlling emotion is critical in all market environments, but especially volatile ones. That's why every investor needs predefined loss limits and exit strategies before entering positions. This takes emotion out of decision-making when market action gets intense. It also ensures you don't lose more than you initially determined was an acceptable and manageable downside risk.
I have rules in place to cut losses quickly if they reach 8-10% below my entry price. I don't get married to positions or believe "it will come back." I stick to the stop loss discipline, book the loss, and move on to new opportunities. This prevents losing emotional control by clinging to downtrending names hoping in vain for a comeback. Accept losses as part of investing, while protecting your capital to fight another day.
Q: What’s one piece of advice you wish every new investor knew starting out?
Understand that investing requires patience, discipline and continuous learning. There are no sustainable get-rich-quick schemes out there. Lasting success comes from developing a personalized investment strategy aligned to your risk tolerance and time horizon. Keep educating yourself on market mechanics, economic trends, and time-tested investing principles.
With the right mindset and vision, retail investors can steadily compound wealth over market cycles. See pullbacks and corrections as opportunities to increase ownership of great companies at discounts. Keep perspective through volatility and trust your long-term plan. The investors with fortitude and an obsession for constant improvement ultimately thrive over years and decades - not overnight.
In Summary
The main takeaway from chatting with Zak is that investing success doesn't happen overnight. He's seen too many eager newcomers go bust by chasing implausible returns without doing the proper homework first.
His advice? Start by getting grounded in investing basics - build up that educational base before putting real money on the line. Once you understand key principles around risk, allocation and analysis, you can start dabbling in markets aligned with your goals.
