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Investing_Psychology_-_Know_Thyself

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					Title:
Investing Psychology - Know Thyself


Word Count:
1027


Summary:
America will continue to be the land of opportunity and regardless of what course our economy takes over
the next few years, it's likely that investment opportunities will be numerous and attractive. Companies
driven by the ever increasing advancements in technology will emerge, while older companies, out of
necessity, will come forth with new products. One industry or another will enjoy a boom period relative to
the rest. And, of course there will be casualties - there alway...



Keywords:
forex, stock trading, option trading



Article Body:
America will continue to be the land of opportunity and regardless of what course our economy takes over
the next few years, it's likely that investment opportunities will be numerous and attractive. Companies
driven by the ever increasing advancements in technology will emerge, while older companies, out of
necessity, will come forth with new products. One industry or another will enjoy a boom period relative to
the rest. And, of course there will be casualties - there always is.


For the astute investor there's always opportunities to buy investments (stocks, bonds, commodities, mutual
funds, etc.) before "the crowd" finds out and it's already over-valued or to buy a so-called "blue chip"
temporarily out of favor, at a depressed price.


In many instances, the differences between great rewards and huge losses are subtle. However, before you
can embark anew or jump back into the game you must ask yourself several questions wrapped into one.


They can be lonely questions because only you can answer them. It involves not only how much money you
feel comfortable investing but it also takes into account the level of risk you are comfortable with.


First, does your financial condition permit you to invest; second, can you assume the current risk implicit in
the markets; and third, is the market a safe place for you to be. Let's take them one at a time.


Your Financial Position
One point should be made clear at the outset: you don't have to be wealthy to invest. In the past, insiders
have trumped the belief that stock ownership is a rich man's game but with approximately 50% of american
households currently in the market that is no longer the case.


The goals of the small investor is not of enlarging their fortune because clearly they currently don't have one
but to make available some money, however small, for the purpose of growing it over time. Regardless of
your income level, investment is possible if three conditions are met:


1. If you are relatively assured of a steady income. Of course, these days nothing is set in stone.
2. If you are meeting your current household expenses and obligations.
3. If you have cash reserves with which to meet unforeseen emergencies. You have to decide how much but
I would suggest enough to cover 3 months of living expenses.


Of course, these conditions are simply safeguards due to the inescapable fact that stock prices fluctuate and
that your judgment of when to buy, when to sell and how long to hold should never be dictated by outside
circumstances. Investment should be undertaken only with funds you can honestly and legitimately
earmarked as discretionary.


A reserve also enables you to pick and choose. Whether you have a few hundred or a few thousand lying
around should not automatically mean that it's time to invest it. What's the hurry? As the professionals say,
"The market is always there." If the trend isn't to your liking or price's are over-valued a reserve allows you
the luxury of waiting for more favorable conditions.


Finally, a reserve permits investment over a period of time rather than all at once. Some "experts" feel you
should back what seems to be a good situation with all the investment funds at your command. Others will
warn against greed and advise partial investment to spread the risk.


This article is not the place to discuss the merits of either philosphy. The point is to give yourself the
flexibility of moving whatever way "your" judgment dictates.


Your Personal Situation
Your age, health, the number of dependents you support, the kind of job you have, or the type of goals you
have set for yourself are just a few of the possible factors that will weigh into your investment decisions.
Unfortunately, there is no rule, no prescription, no secret formula to follow.


The story is told of two salesmen who met at the airport. Their conversation went something like this:
"How's business?" asked the first. "Oh, very good," said the second, "and yours?" "Fine, fine," said the first.
"I got orders for a thousand gross last week. I sell buttons." "Really," said the second. "I've had one order in
the last three years." "and you call that good?" said the first. "Actually yes," said the second, "I sell
suspension bridges."


Like the salesmen, the investor must have a clear notion of his goals and expectations and they must realize
what is normal and acceptable to someone else might not be what is normal or acceptable to them.
What Kind of Person You Are
Consideration of your investment goals brings up the final point of personal evaluation - You. Very simply
because your goals are a reflection of your temperament and personality.


You must go beyond your goals and pin down the traits and characteristics they stem from. Are your goals
realistic? How do you regard money? How do you handle it? Are you easy-come, easy-go or do you count
pennies? Are decisions involving money difficult for you to make? Are you on top of your budget or always
running to keep up?


These are generalized questions and there are no absolute answers. Speculators should stay out of the
market, but on the other hand, being a tight-wad is no virtue either. An overly cautious or conservative
temperament may not be well-suited to react to the ever changing market conditions and thus miss out on
opportunities to sell or buy.


The value in knowing thyself and how you will likely respond in a variety of financial situations is vital.
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, the elder Morgan stared at a questioner who wanted to know what stock
prices would do and he said, "They will fluctuate." The statement is as pertinent today as it was then. As a
result, the question you must ask becomes, "How will I respond when they do?" If you "Know Thyself"
you'll have the answer.


This article may be reproduced only in its entirety.




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