The main question you must ask yourself before you decide to invest in the stock market is whether or not you want to do this full time or part time, or maybe just an occasional investor.
For some investing in the stock market may be too much of a risk, for others it may not be risky enough. Whatever you're feeling is one thing remains constant, investing in the market can be a terrific place to put your money.
This article addresses some of the qualities an investor should have in order to make a reasonable return in the stock market. The Stock Market is like a friend, either you have the personality to get along with the market or you don't. Let's take a look at some of those qualities.
Sure, there are folk tales you may hear about the guy who bought abc Company stock for $10 a share and sold it 60 days later for $100 a share. This scenario probably has happened , but it is not the reality of being an investor. The following points should be considered when you are considering becoming an investor.
Can you make decisions and Are you self-disciplined in your thinking?
The first step anyone must take into account is their own personality.
1) Are you objectively a person who is organized in your thinking? Do you know how much money you have to invest?
2) Do you know how to set objectives in your finances?
3) 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.
4) Is the amount of money you intend to invest a one time wind fall?
5) Are you able to set aside a certain amount of money each month to investing that is disposable income?
In effect what you will be doing is moving some of your pass book savings to an investment. 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 pass book 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. It is this excess that will be your investment dollars.
Are you able to set goals and listen to good advise?
If you decide to do your investing through a Stock Broker then you will need to be able to listen to their advice and accept than what they are telling you. Once you have determined that investing may be a possible avenue for you to consider the next step is setting goals.
A goal is the objective of your investment. It could be for retirement, a vacation home, a rainy day fund or a new boat. Whatever your goals are 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 pass book 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 automobile. 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.
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.
Day Trading has come into it's own over the last few years and can be a great method for the at home investor to make a living, but this method is not for the faint of heart or the beginner, you need to have some experience or guidance before tackling this type of investing.
The mutual fund investment works differently that buying individual stocks. If you are satisfied that your choice of a fund met all of your criteria for investing let it alone and review it only periodically. If your mutual fund for any reason meets with unexpected long term problems you can change funds. I would review the fund on a quarterly basis and discuss this with the fund account manager or representative.
This is the investor personality that you need to have in order to have a lifetime of success in the stock market. If you have it, it works. If you don't, try another type of investment.
You can be good at making excuses and you can be good at making money, but you can't be good at both. The bottom line is if you have the desire or the need to supplement your current income with some type of investment and fear or excuses have been holding you back. Then there is no time like the present to get started.
Wall Street and the stock market is a great place to begin your investing career. Whether it be in mutual funds, or picking winning stocks, or maybe it will just be at your work with your 401k program, it doesn't matter where you get started, what is important is that you get started.
There are many great places on the internet that can help you get started in stock investing, you just need to surf the net and you will find more than enough sources to help you get started.
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