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Investing_Psychology_-_Know_Thyself

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					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.

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