By Harry Lombard
The threshold question before you decide to invest in the stock market is whether you are an investor. For some people the stock market may not be suited to their personality. This article addresses some of the qualities an investor should have in order to make a reasonable return in the stock market.
Sure, there are folk tales you may hear about the guy who bought XYZ Company stock for $5 and sold it Two months later for $50 a share. This scenario probably has happened , but it's not the reality of being an investor. The following points should be considered when you are considering becoming an investor.
Have you been self-disciplined in your thinking? The first step anyone will need to take into account is their own personality. Are you objectively an individual who is organized in your thinking? Do you are aware how much money you have to invest? Do you are aware how to set objectives in your finances? Have you place goals for savings and followed through on those objectives? An investor has to have a clear group of objectives in their choice of investments. Is how much money you intend to invest a 1 time wind fall? Are you in a position to set aside a certain amount of money every month to investing that's disposable income?
Essentially what you will do is moving some of your pass book savings for an investment. Patterns development in peoples lives. Are you able to transfer your savings pattern to incorporate a regular purchase of the stock market? If you are currently earning half the normal commission on your pass book checking account what rate of return would you be satisfied in receiving? The answer to investing is to know your expenses and income and choose how much money is disposable income. It is this excess that'll be your investment dollars.
Are you able to set goals and listen to good advise? Once you have determined that investing may be a possible avenue for you to consider the next step is setting goals. A goal is the objective of your investment. It could be for retirement, a vacation home, a rainy day fund or a new boat. Whatever your is determines the type of investing you will be looking for in your research. If it is a long term goal like retirement you may seek a tax exempt municipal bond fund or a mutual fund with certain characteristics. If you want liquidity like a pass book savings account where you can draw money as you need it there are some investments that may fit. The important aspect of this step is to know your objectives and then draw up a budget or a plan.
All of the major fund companies have managers and consultants. Is it possible to set forth your objectives and ask for advice in picking out a fund which will fit your needs? This does not necessarily mean you need to subscribe to the first consultant who takes your call. This means can you pay attention to advice and make a decision on various alternatives agreed to you. Once you have gathered all the details you believe is essential for your decision are you able to apply your personal goals using the information presented and make a final decision?
This may seem like an odd inquiry, can you make a final decision? Unfortunately, some people will feel quite comfortable going to a car show room and purchase a $30,000 automobile. The color, impression, and internal motivators. But when it comes to investing, the buy is not as dazzling. It takes consideration to commit $30,000 to an investment in paper form even though you may be purchasing stock in the flashy car company.
Can You Let Go? The ultimate and perhaps most significant aspect of deciding if you are a stock investor is, YOU. After you've gone through all of the self analysis, goals, research and advice of others making your final decision the next thing is critical. Have you got the personality to allow your investment to consider its course? Can you sleep at night? Unless you are a day trader who plays the upside and problem with the stock market and I wouldn't recommend this to anyone starting out. You have to be in a position to roll with the punches. Trust your instincts and review your investment on a monthly or quarterly basis. If you purchase individual stocks, place a restriction order about the account. A restriction order allows your broker or on-line account to sell if the price falls.
The mutual fund investment works differently that buying individual stocks. If you're satisfied that the choice of a fund met all your criteria for investing let it alone and evaluate it only periodically. If your mutual fund unconditionally meets with unexpected long term problems you are able to change funds. I would evaluate the fund on the quarterly basis and discuss this using the fund account manager or representative.
This is actually the investor personality you need to have in order to have a duration of success in the stock market. For those who have it, it really works. If you don't, try another type of investment.
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