In my excitement the latest release of my Internet Marketing ebook, I managed to totally forget my Bullhunter blog. My apologies! Maybe I can cheer you up with this video on my motivational blog >> It is guaranteed to make you laugh. Now, onto the topic: Basic Investment Strategies.
Underlying stock market needs
In any type of activity, there are always those people who seem to need to “keep up with the Joneses”. If the neighbors buy a new car, they have to buy a new one, and preferably one that’s more expensive, with fancier features. If the neighbors get new golf clubs, guess what? They’ve got to have them as well. No one is really sure what drives this sort of behavior, but it’s obvious that there’s some sort of underlying need for these people to prove themselves to those individuals with whom they are interacting. When these people become involved with the stock market, it’s just a disaster waiting to happen.
The serious investor
How many times have you heard the phrase serious investor used to describe someone who has sunk nearly all of their assets into the stock market? Don’t fall into this trap! The seriousness of an investor is measured by the amount of thought and care they put into managing their portfolio, not the actual dollar amount that they’re playing with. Some people never seem to get this message though. In an attempt to be taken seriously, they just keep on sinking in more and more money, regardless of the potential consequences.
What do you hope to gain by investing?
What ends up happening to these people, inevitably, is that a loss hits them, and they lose way more than they are comfortable with losing. In their desire to look serious or to be taken seriously by others, they failed to ask themselves the question of what they hoped to gain by investing. Some people are okay with a loss of 20% on their investments. Some can even handle 50%. Others might run screaming at a mere 10% loss. All of this is fine so long as you’re honest with yourself about how deeply you want to swim in this pool. Don’t go out further than you’re comfortable with, and you’ll never get into trouble that you can’t get out of.
See you next week for part 12 of Basic Investment Strategies.
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 – 2008
{ 2 comments… read them below or add one }
Hi Sean,
Again, this is very sound advice. Never buy more shares than you can handle losing. I think it’s about knowing who you are and what kind of risk you like to take.
Some people are more comfortable taking big risks with their money and some aren’t. So, buying and selling shares should be about you and not what you’re trying to prove to anyone else.
I am a happy trader. If trading stressed me out I would not do it. If I am really tired I don’t trade. One thing I learned from one of my teachers is to be in the right frame of mind for trading or don’t go there.
There will always be another trade, never fear.