The Mindset Required To Invest In The Markets Is Know Yourself

tolerance to investingThose who live in the free world are granted to do whatever they like. It’s the land of opportunity, and regardless of what course the economy happens to take over the next few years, what’s assured is that investment opportunities will be numerous with potential.

Companies which are driven by the increasing advancements in technology will emerge, while older companies out of necessity, will come forward with new products as well. One industry will enjoy a boom period while others will become casualties, there always is.

For the investor who has a keen eye to recognize trends, there’s an absolute opportunity to involve themselves in investments such as stocks, bonds, futures, or currencies.

They do so before “the crowd” finds out, the instrument becomes over valued, or they buy a so called “blue chip” stock that’s temporarily out of favor, or at a depressed price.

Taking Advantage Of Profit
In most cases the difference between huge rewards and substantial losses are subtle. However, before embarking or jumping into the game, what you need to ask yourself are several questions of intent.

These are lonely questions because only you can answer them. It involves not only how much money you feel comfortable investing, but also takes into account the level of risk that you’re comfortable with.

Does your current financial condition permit you to invest; can you assume the current risk implicit in the markets; and is the market a safe place for you to be right now.

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Your Financial Situation
One point to be made clear from the outset is that you don’t need to be wealthy to invest. In the past, insiders constantly trumped the belief that stock ownership was a rich man’s game.

But with approximately 50% of households now currently in the financial markets one way or another, that’s no longer the case.

The goal of the smaller investor isn’t to earn exponential fortunes, but to make available some additional money for the purpose of growing it over time.

Regardless of one’s income level, investing is possible once three conditions are met:
• Are you relatively assured of a steady primary income, although nothing’s certain these days
• Are you meeting your current household expenses and obligations
• Do you have cash reserves for unforeseen emergencies. What’s recommended is enough funds to cover 6 months of living expenses

Becoming A Discretionary Investor
These are just the core safeguards due to the inescapable fact that market prices fluctuate, and that your judgment on whether to buy, sell, or hold, should never be dictated by outside circumstances.

Investing should be undertaken only with funds that you have honestly and legitimately earmarked as discretionary capital.

A reserve enables you to pick and choose, that just because you have a few thousand lying around, doesn’t automatically mean that you should be investing it right away.

There’s no rush, as the professional traders will say, “The market will always be there.” So if the trend isn’t in your favor, the price is overvalued, what a reserve allows is waiting for more favorable conditions.

A reserve permits investments over a period of time, this rather than all at once. Some experts claim that you should go into what’s a good situation with all the funds at your disposal, while others insist you spread the risk.

Your Personal Situation
Your age, health, occupation, number of dependents, your ultimate goals, all weigh into your investment decisions. Unfortunately, there are no rules, no prescription, no secret formula to follow.

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There’s a story of two salesmen who met at the airport. The first asks, “How’s business?” the other replies “Good.” “Great” said the other salesman.

“I got orders for a thousand gross just last week.” “Really!” said the second salesman. “I’ve just had one order in the last three years.”

“You call that good?” asked the first salesman. “Actually yes,” said the other, “because I sell locomotives.”

Similar to the salesmen, an investor needs to have a clear notion of his goals and expectations, and needs to realize what’s normal for them, might not be normal or acceptable for someone else.

What Type Of Investor Are You
Consideration of your investment aptitude brings up the final point of personal evaluation, and that’s you. This because your end goals are a reflection of your temperament and personality.

You need to focus beyond your goals and know where they stem from. Are they realistic. Know how you regard money, and handle it.

Are you “easy-come easy-go,” or do you constantly count pennies. Are your money decisions difficult for you to make, or flamboyant, or do you stick within a budget.

There are no absolute answers. Pure speculators should exercise caution in the markets, while being a tightwad has no virtues either.

An overly cautious or conservative temperament may not necessarily be suited for the ever changing market conditions, as they may miss on opportunities to buy or sell.

Know Thyself First
The value in knowing oneself and how you’ll likely respond in a variety of financial situations becomes key. Any personality type can count profits, but it requires a certain rigor, a certain fortitude to face up to the adverse situations that investing unveils.

If you have a character flaw, losing money will quickly expose it. In a now famous pronouncement, one novice investor asked a seasoned veteran if they expected a certain stock price to go up or down. The reply was, “It will fluctuate.”

This statement is evergreen and pertinent today as it was decades ago. So as a result, the question that you need to ask yourself is, “How will I respond once they do fluctuate?” If you know yourself first, then you’ll know the answer.

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