Do You Consider Yourself A Stock Market Investor?
Do you consider yourself a stock market investor? This is a question you need to ask yourself before you decide to invest in the stock market, and trust me it is a valid question. Some people just are not made for the stock market. We will try to show what are 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 ABC Company stock for $9 and sold it 50 days later for $70 a share. This scenario probably has happened , but it is not the norm for an investor. The following things should be considered when you are considering becoming an investor.
Do you consider yourself disciplined in your thinking?
The first step anyone must take into account is their own personality. Are you objectively a person who is organized in your thinking? Are you aware how much money you have to invest? Do you know how to set objectives in your finances, and follow them? Have you set goals for savings and followed through on those objectives? An investor has to have a clear set of objectives in their choice of investments and be focused on them. Is the amount of money you intend to invest a one time wind thing? Are you able to put aside a certain amount of money each month to investing that is income you will not need?
In reality what you will be doing is moving some of your savings to an investment platform. Patterns development in peoples lives. Are you able to transfer your savings pattern to include a regular investment in the stock market? If you are currently earning a small percentage on your savings account what rate of return would you be satisfied in receiving? The key to investing is to know your expenses and income and decide how much money is disposable income in other words money you could live with out. It is this money that you will be investing in the stock market.
Can you set goals and listen to advise on setting those goals?
Once you have determined that investing in the stock market may be a possible avenue for you to consider the next step is setting goals. A goal is the objective of your investment in the stock market. It could be for retirement, a vacation home, an emergency fund or a new RV. Whatever your goal is it 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 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. Are you able to set forth your objectives and ask for advice in picking out a fund that will fit your needs? This does not mean you need to sign up for the first consultant who takes your call. It means can you listen to advice and make a decision on various alternatives offered to you. After you have gathered all the information you believe is necessary for your decision can you apply your personal goals with 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 Mercedes. 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.
When the time is right can you let go?
The final and perhaps most important aspect of deciding if you are a stock investor is, YOU. After you have gone through all of the self analysis, goals, research and advice of others and made your final decision the next step is critical. Do you have the personality to allow your investment to take its course? Can you sleep at night? Unless you are a day trader who plays the upside and downside of the stock market and I would not recommend this to anyone starting out. You have to be able to roll with the punches. Trust your instincts and review your investment on a monthly or quarterly basis. If you buy individual stocks, place a limit order on the account. A limit order allows your broker or on-line account to sell if the price goes down.
The mutual fund investment works differently then buying individual stocks. If you are satisfied that your choice of a fund met all of your criteria for investing leave it alone and review it only from time to time. If your mutual fund for any reason meets with unexpected long term problems you can change funds. I would take a look at the fund on a quarterly basis and discuss this with the fund account manager or representative.
This is the investor mindset that you need to have in order to have a lifetime of success in the stock market. If you have this state of mind, it works. If you do not, try another type of investment vehicle. The stock market is not for everyone.
Subscribe to the comments for this post