The Correct Attitude for Successful Investment |
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| By Damian Papworth. |
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| Attitude with investing is so important. 'Why?' you ask. Its
simple really. When investing, you want all your decisions
to be made on the information relating to the investment and
for reasons specific to the investment. You do not want to
find yourself in the position where you are making decisions
about an investment, because of factors which are irrelevant
to the investment. Thus the adage, 'Plan the trade, and
trade the plan'. Here are a few pointers which may help. 1. Only invest with money that is not and will not be destined for basic living expenses. Even if the money is needed only several months down the line do not even think of using it for an investment. The reason for this is that if you do invest that money, subsequent decisions on the investment will be shaped by basic living expense needs, which strictly speaking is not a factor pertinent to the investment. To give an example, imagine that that money is destined for a mortgage repayment in three months time. It just may turn out that your investment drops precisely on the week when you need that cash. In this scenario, following the correct strategy you would hold off for another week; yet given your need to repay your mortgage on time, you close that particular investment. In the end, the decisions relating to the investment were made based on information irrelevant to the investment itself and a loss is incurred. Hence the wisdom of only investing money that you do not need for living. 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. Any and every investor needs to accept that failed trades are a basic fact of life. Everybody will make a certain amount of trades that run into losses. The important part here is the attitude that you adopt in the face of such losses: being a poor, vision-less loser in such events will prevent you from ever becoming a successful investor over the long haul. Following are two exemplary ways to contemplate an unsuccessful trade. 3a). Rather than considering your trades on a one by one basis, look at them as a complete group. For example, a certain strategy you use may make you a profit four out of five times, which is to say that one out of five times you run a loss. What you should do in this circumstance is rack up the net profit across all five trades, including the losing trade, and divide the result by five. The final figure would be your per trade profit. In this way, the losing trade is merely part of a broader winning strategy: 20% of the total net result is in fact due to the losing trade, because it is a necessary part of a broader strategy. In this manner, you save yourself from abandoning a good method simply for fear of small failures. 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. Investment work and the markets are known for being able to bring out people´s best and worst features. Thus, controlling one´s emotional and irrational reactions is fundamental so that they don´t cloud decisions. As the saying goes: 'Plan the trade, and trade the plan.' |
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| Article Source: http://interpret.zar.vg | ||||
| About The Author Damian Papworth makes investments for his lifestyle and his family. Not too long ago he researched baby high chairs. He created a website with his findings on high chairs for babies. |
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