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I am going to share with you some powerful ideas which will make you re-think your approach to investing and, if implemented, will make you much better investors, I am sure.
With the change of pension fund laws here in the UK more and more investors are opting for SIP’s, hence the need to educate themselves about investing is greater than eve before.
There are many myths around which have been adopted as “truths”, however, if you plan your investment portfolio around them you will more likely lose money rather than making it.
Let’s first take a look at why exactly you are not making the money you want from your investments:
The answer is actually very simple: You keep doing the same things you have always done. This probably means that you are playing safe rather than looking for opportunities in an unbiased manner.
You are probably wearing blinkers in your attempt to do the right thing with your investments, totally misunderstanding the all important issue of risk.
Risk management is a comprehensive subject of its own. I will cover it in another article in detail. I can guarantee you though that you probably haven’t the foggiest idea what good risk management is all about. Most investors I speak to think they know, but once we get down to it, it is clear they do not understand risk, let alone manage it correctly.
Knowing what top invest in and when of course is crucial. For example, investing in funds is deemed to be low risk, but this is not necessarily the case, as the commissions eat up much of the profits.
The cost of doing business, namely spreads and commissions are a consideration, and can affect your bottom line quite considerably, particularly if you trade more frequently, as I believe will b necessary this year, which promises a degree of volatility making for great opportunities, alas you need to be nimble.
Ignorance is not a crime, rather it is an opportunity to learn:
So, let’s now look at what you should be doing and could be doing right away, if you are serious about making serious money from your investments:
1) Understand the nature of risk. Don’t risk more than 1% on any investment
2) Educate yourself about trading psychology. Unless you know the psychology at play you will not develop a feel for market turns.
3) Learn about the psychology of cycles. It is vital in timing your trades correctly
4) Learn to trade short term. It will speed up the learning process and add immense value to your portfolio in times of volatility.
5) Be passionate about what you are investing in, or stay away
6) Get out of your own funk, (ego judgements) Your conditioned judgements are the biggest block to lasting trading and investment success.
7) Think big versus small and safe. You get what you focus on consistently. Learn to think correctly.
8) Inform your self about what is going on in the world of finance. It is the basis for finding opportunities early.
9) Know yourself. This vital part is often overlooked. Unless you know what works for your individual investment psychology, you will feel anxious and succumb to the opinions of other traders.
This year promises to be an interesting year:
There are opportunities setting up in the oil sector. Personally I like trading Crude and oil companies. I have no definite trading signal yet, but we could be looking at a substantial countertrend move.
Right now there are also good opportunities in gold and silver stocks. $SLW, silver Wheaton, and the Gold miners ETF $GDX are worth a look for a trade.
When you have developed a sound trading psychology you will be able to trade on the other side of the crowed trade with confidence.
The money is to be made where few other traders and investors are looking.
In order to trade like this you need to have mental stamina. By far your greatest trading assets are your mind and body. Look after them well, hone new skills and you could be surprised about the great opportunities you will find this year.
I am passionate about helping traders and investors finding their personal mental sweet spot. Trading and investing are immense fun, when you know how to play the game with confidence. The skill also secures your future in ways no other skill can in mu opinion. Investing and trading is quick, dynamic, and low risk if you know what you are doing.
Your job is to get the skills.
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Mercedes Oestermann van Essen is an active trader, trading psychology coach and the author of“The Buddhist Trader” and other books on trading psychology.
She holds webinars and bespoke trading psychology seminars for high net worth investors, and professional traders.
