If you are going to be an investor, you need to know who you are as a person and what your personal style of investing is.
For starters, be sure that investing is right for you. Having a 401(k) or IRA is pretty simple to manage but once you start dealing with a real market portfolio, you need to make sure you not only know what you are doing but that the type of investing that you are doing matches your personality.
1.) Since the market crashed in 2008, everyone is on edge about poor performing funds. After viewing the most recent quarterly statement in your retirement portfolio, you are shocked at the losses. With retirement 30 years away, can you afford this loss?
A.) Yes, probably. Stocks are volatile and having a portfolio means having ups and downs.
B.) No, I have to sell and sell now! Maybe I should even sell the “just ok” stocks and go with low risk bonds.
C.) Probably – I’ll know after I check with my finance guy, the benchmark indexes, my family and budget.
2.) You’ve heard it through the grapevine that a certain company dominating the electronics industry has just had a big lay-off. You own stock in this company. Do you:
A.) Ignore this gossip.
B.) Head straight to the nearest computer to sell your shares.
C.) Spend the next couple of days doing intense research and calculations.
3.) You have the opportunity to make your portfolio more aggressive giving you a better financial gain over the long run. You decide to:
A.) Just ask your financial advisor what to do.
B.) Go for it. It sounds like a good idea. Who doesn’t want more money!
C.) Talk to your financial advisor, examine the investment options and objectives – maybe even reduce the amount you are contributing.
Mostly As mean that you are really lax when it comes to change and making decisions. A large part of investing involves decision-making. If this is your personal style, you do not have to take yourself out of the investment game, but you do need to have a good financial team and a knowledgeable (and trustworthy!) financial advisor around you to urge you to make the best financial decisions for you. Pick people who will do the hard work for you, and you can still turn a profit.
Mostly Bs mean that you are very aggressive and ready to go! Don’t move too fast though or you will stray from your financial goal, if you have one. Selling as soon as you hear bad news, confirmed or not, can still cost you big time. Don’t be afraid to take time to evaluate your options. The more you know, the more you can trust your knowledge and intuition (gut feeling) when split second decisions need to be made and that is your strong point.
Mostly Cs mean that you are a researcher. While this can be the best way to invest, you do not want to move too slowly to catch a great return. Gut feelings are said not to mix with investing but no one says anything about your conscience. With all that knowledge in your brain, how could you make an uneducated decision, let alone the wrong decision, if you are on track with current market conditions and a good financial firm?
Now this is just one way to determine what kind of an investor you are or could be. These examples are not exact points that tell you what you need to do. They are simple ways of allowing you to look at yourself subjectively to learn how to best spend your time and money pertaining to the investment world. You can always use a free investing simulator to find your success if you need to know more. Just make it a point to avoid jumping into the stock market without knowing if you are someone who is really ready for it.