The Correct Attitude for Successful Investment
In the world of investments, attitude counts for a lot. Why is that, you may be asking? The answer is simple: in investing, it's important that your decisions be founded exclusively on information and reasons pertinent to that investment. You never want to put yourself in the situation where you end up making a decision on an investment based on completely extraneous and irrelevant matters. Hence the saying "Plan the trade, and trade the plan." I've listed some points which may help you with this.
1. Never invest money you need to use for your living expenses. Even if you don't need this money this month, next month, but you know you'll need it in 3 months, don't invest it. If you put money in any investment market that you need to pay for your living expenses, at some stage you will need to make a decision about that investment, due to your living expense commitments.
For example, Lets say you need that money in 3 months to pay a mortgage repayment. Your investment may temporarily drop on the very week you need the money. In this situation, the correct decision, based on your strategy, could be to hold for another week. But because you have the mortgage, you make the decision to close the investment. This decision was made on information which was irrelevant to the investment and ended up ruining the trade and causing a loss. This issue would never exist if you only invested money you didn't need.
2. When making investments, it is often a helpful technique to imagine to yourself that that money has been completely lost the minute you invested it. The simple reality is that many investments look bad before they end up looking good, which is simply due to the normal fluctuations in investment markets. Countless investments have been ruined by people (myself included) who chickened out too soon and didn't allow the investment to come to fruition in time.
Thus, by convincing yourself the money is lost once you invest it, you effectively spare yourself the nervousness many investors suffer doing this lapse of time. Take it from someone who knows: nothing is more frustrating than closing an investment early at a loss, only to watch the same investment for others pull a 180 and make them loads of money...if only!
3. Another part of your attitude as an investor must be the recognition that failed investments are just a part of the game. Any investor will incur losses at one point or another during their track record; what's important is to know how to react to those losses in the right way, with the right attitude. Letting them affect you in disproportionate measure will keep you from ever becoming a savvy investor in the long term. Below are two very helpful ways for viewing unsuccessful trades:
3a). Don't look at trades individually, rather look at your trades as a group object. For example, you may have a strategy that works four out of five trades. One out of five trades on average makes a loss. What you need to do is tally your net profit over all five trades, including the loss, and divide this by five. The result is your profit per trade. If you do this, you can actually view your losing trades as profit earners. IE. You attribute 20% of your five trade net result to the unsuccessful trade, simply because it is a crucial part of a successful strategy.
The end result of this kind of attitude is that you don't let the fear of tiny mistakes or failures keep you from accomplishing larger goals.
3b). Consider your losses to be tuition for your investment education. In case you are not one of them, most of the people in this industry have put down many thousands of dollars and dedicated many years of their lives on getting degrees in the matter. For those that jump in without such degrees, the education comes as part of the failed trades: hence, make sure you learn from each and every one of them! The right, professional attitude is necessary here, free of emotions, as otherwise you're sure to lose the long term profitability of such endeavors.
The investment markets, any of them, can bring out the best and worst of your emotions. It is ultra important to get these under control so they don't impact your investment decisions. Remember, Plan the trade, and trade the plan. - 23218
1. Never invest money you need to use for your living expenses. Even if you don't need this money this month, next month, but you know you'll need it in 3 months, don't invest it. If you put money in any investment market that you need to pay for your living expenses, at some stage you will need to make a decision about that investment, due to your living expense commitments.
For example, Lets say you need that money in 3 months to pay a mortgage repayment. Your investment may temporarily drop on the very week you need the money. In this situation, the correct decision, based on your strategy, could be to hold for another week. But because you have the mortgage, you make the decision to close the investment. This decision was made on information which was irrelevant to the investment and ended up ruining the trade and causing a loss. This issue would never exist if you only invested money you didn't need.
2. When making investments, it is often a helpful technique to imagine to yourself that that money has been completely lost the minute you invested it. The simple reality is that many investments look bad before they end up looking good, which is simply due to the normal fluctuations in investment markets. Countless investments have been ruined by people (myself included) who chickened out too soon and didn't allow the investment to come to fruition in time.
Thus, by convincing yourself the money is lost once you invest it, you effectively spare yourself the nervousness many investors suffer doing this lapse of time. Take it from someone who knows: nothing is more frustrating than closing an investment early at a loss, only to watch the same investment for others pull a 180 and make them loads of money...if only!
3. Another part of your attitude as an investor must be the recognition that failed investments are just a part of the game. Any investor will incur losses at one point or another during their track record; what's important is to know how to react to those losses in the right way, with the right attitude. Letting them affect you in disproportionate measure will keep you from ever becoming a savvy investor in the long term. Below are two very helpful ways for viewing unsuccessful trades:
3a). Don't look at trades individually, rather look at your trades as a group object. For example, you may have a strategy that works four out of five trades. One out of five trades on average makes a loss. What you need to do is tally your net profit over all five trades, including the loss, and divide this by five. The result is your profit per trade. If you do this, you can actually view your losing trades as profit earners. IE. You attribute 20% of your five trade net result to the unsuccessful trade, simply because it is a crucial part of a successful strategy.
The end result of this kind of attitude is that you don't let the fear of tiny mistakes or failures keep you from accomplishing larger goals.
3b). Consider your losses to be tuition for your investment education. In case you are not one of them, most of the people in this industry have put down many thousands of dollars and dedicated many years of their lives on getting degrees in the matter. For those that jump in without such degrees, the education comes as part of the failed trades: hence, make sure you learn from each and every one of them! The right, professional attitude is necessary here, free of emotions, as otherwise you're sure to lose the long term profitability of such endeavors.
The investment markets, any of them, can bring out the best and worst of your emotions. It is ultra important to get these under control so they don't impact your investment decisions. Remember, Plan the trade, and trade the plan. - 23218
About the Author:
Damian Papworth makes investments for his way of living and his family. Not too long ago he investigated baby high chairs. He created a website with his findings on high chairs for babies.
posted by X - Men @ 6:47 AM
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