Tag: investor

Characteristics of a Successful Investor

Characteristics of a Successful Investor

Whenever we talk about someone who has successfully paved his way through investing in the stock market, it is never a matter of having a luck, but rather certain personal qualities or characteristics that determine how successful he/she is. Although, the best investors may seem have been born with the appropriate characteristics, it remains possible to discover and acquire them yourself. Believe it or not, most of what you need to know is just stock market investing basics.

Just remember that you can improve your chances of success. Below are some qualities of a successful investor that you need to know.

  1. They carry a well-thought-out investing strategy

Every successful investor has an over-time-developed-and-a-well-thought-out investing strategy that definitely works and they stick to this strategy. Some successful investors incorporate the portfolio diversification strategy and other follow the portfolio focus strategy. However, you are still entitled to have your own investing style. No matter what strategy you use, make sure that you fully know and understand what you are doing.

  1. They are dedicated

Successful investors are dedicated and concentrated on their investment vehicle. They take it one step at a time and one investment at a time.

  1. They make use of the trend to their advantage

Successful investors know how to use trend to their advantage. Average investors tend to panic over market instabilities, but professional investors welcome these instabilities because it is based on these instabilities that they can make their money. They use trends such as market sentiments, political instability and company’s crisis to their benefits.

  1. They are determined

Indeed, adhering to your investing strategy, whether you are winning or losing needs you to have a great determination. Average investors lack persistence and that’s the reason why they will always remain average. They hop from one strategy to another and are always looking for the next hot tip.

  1. They prosper on risk

It is true that investing is a risk, however, not knowing what you are executing is a lot greater risk. Every professional investor, whether experiencing a winning side or losing side still respect and consider the 50-50 chance of success or failure. The big difference between a professional investor and an average investor is that a professional investor will always invest with a strong risk management scheme in place.

  1. They are disciplined

Successful investors are rigorous with themselves when it comes to investing. Aside from their investing rules and principles, they are also guided and driven by a strong self-imposed standard. Professional investors understand that it takes a huge deal of discipline to stand with you investing strategies, in spite of distractions from self-proclaimed specialists or financial experts.

  1. They know their strengths

Everyone possesses their own strengths and weaknesses. Successful investors understand that it is essential to invest inside their circle of competence. There is no quick way to lose money than investing in something you don’t completely understand. If you couldn’t determine what a company does or how it makes money, then it is often suggested to just stay away, no matter how profitable the opportunity might be.

Learn the Different Types of Trading Style

Learn the Different Types of Trading Style

A lot of people who get interested in trading are primarily acquainted with the financial markets through investing. The purpose of investing is to grow wealth slowly over time, and this has normally been done through  a buy-and-hold approach, making investments and allowing price to alter over time. Investors endure the unavoidable downturns with the anticipation that prices will, in the long run, rebound and rise over the long-term.

Selecting the trading style that best fits your personality can be a difficult undertaking, especially if you are a beginner trader, but it is certainly essential to your long-term success as a professional trader. When you finally found the style of trading that best suits you, a light often turns on and you may never look back. If you are not comfortable with your style or have not found a home in a specific trading style, you are prone to committing the biggest sins of trading.

The difference between the styles is based on the length of time that trades are held for.  Below are the different types of trading style you should learn about to help pave your way to becoming a profitable trader.

  • Scalping

This type of trading style requires trading within just a few seconds of each other, and often goes in opposite directions, as it is a very quick type of trading style. This style is very appropriate for active traders who can decide quickly and act on his decisions without reluctance. Impatient people often are the best scalpers, because they always anticipate their trades to get profitable promptly, and will exit the trade quickly if it is going against their trading whims. To become a successful scalper, you have to have focus and concentration. So, if you are a type of trader who easily get distracted, then scalping is not for you.

  • Day Trading

This type of trading style is more appropriate for traders who like beginning and accomplishing a task within just the same day. A lot of day traders would not think of making swing trade or position trade because if they do, it will cause them to stay awake at night knowing that they had an active trade that could be affected by price movements during the night.

  • Swing Trading

This type of trading style is well-matched with people who have patience for a trade, but once they have started a trade they want it to be profitable quite quick. Traders of this style almost always hold their trades overnight, therefore, those people, who get nervous holding a trade while they are away from their computer, are not fit for this style. Generally, this trading needs a larger stop loss than day trading, so it is necessary to have the ability to get calm when a trade goes against you.

  • Position Trading

This type of trading style is the longest term trading of all the styles and often possess trades that last for years. That means, position trading is very compatible for people who have more patience and least excitement. This style requires the ability to disregard popular opinion because a single position trade will often hold through both bull and bear markets. So, if you easily get persuaded by other people, then position trading is going to intricate on your part.

Aside from the reason that picking a trading style needs the flexibility to perceive if a certain trading style is not working for you, it also needs the consistency to stay with the right trading style even when it is not performing optimally.

Some Disadvantages of Portfolio Diversification

Some Disadvantages of Portfolio Diversification

Making your portfolio diversified across a number of various investment categories, such as stocks, bonds, and cash equivalents, and within categories, such as stocks from different kinds of companies and a mix of corporate and government bonds can help decrease your risk. But there can be some disadvantages to diversification.

Indeed, diversification is universally recommended to lessen the risks of losing money, volatility and emotional stress. However, just as it can limit downside by reducing the possible risk and volatility across a group of investments, it can also limit your upside. It is actually possible for diversification to increase your risk if it leads you to buy investments that are too risky or that you don’t even understand very well.

A more-diversified portfolio can also be more time-consuming to handle than a less-diversified one, because you need to follow and trade in more investments, adding more layers of diversification just to make sure you are following to them. If maintaining your diversification requires you to micromanage and trade more frequently, transaction costs could be higher.

Below are some disadvantages of diversification that you might encounter eventually in your investment journey.

  1. Incomplete Return

Diversification can help you from striking out,  but it also keeps you from hitting a home run. For instance, if you invest your money in five various stocks, and one takes off, the other four stocks hold back your total return.

  1. Cost

Typically, you have the option of investing through a full-service broker, a discount broker or an online broker. Each category of broker has a unique commission format, and they all actually charge commissions or transaction fees. Placing all your money into a single investment normally can end up to a lower total fee than investing the similar amount of cash to a number various investments.

  1. Missed Fortune

You are neither to make a huge profit from a single sector nor to suffer a huge loss, if your portfolio is widely diversified. If 5 percent of your holding unexpectedly spike, you will make far lesser profit than if 100 percent of your holdings were in that place. It is very difficult to forecast or predict where and when this will occur to an asset class or market sector. The more firmly your investments are focused, the greater risk you are actually taking, and this can lead to bigger losses or to bigger gains.

  1. Wider Exposure

You could experience some amount loss whenever some part of your portfolio declines in value, if your holdings are widely diversified. If the overall market is decreasing, it is more likely that your holdings will perform the same thing. When you diversify your investments, you safeguard yourself from extreme financial exposure, but at the cost of missing out on probable major profits.

  1. No remedy

If you invest in a number of different stocks that all end up to be problems, your portfolio will still lose money, even if it is diversified. That’s it, diversification neither guarantees a profit, nor completely secure you against a loss.

Some Tips to Diversify your Portfolio

Some Tips to Diversify your Portfolio

Diversification is using various trading strategies and ways for an investor to have a great chance of survival. However, if diversification is not done effectively, it can have an opposite impact and compound instead of diminish risk. So, it is better to have diversification done in a correct and proper way.

Diversification is a battle cry for many financial planners, fund managers and individual investors alike. It appears almost impossible to sell a stock for any less than the price at which you purchased it, when the market is increasing. It may also seem silly to be in anything but equities, when the indexes are surging up. We should take into account the importance of a diversified portfolio in any market situation, because we are unsure of what will happen in the market at any moment.

Moreover, it is always important to regularly check your portfolio. You must always check your asset allocation, at least once a year, or anytime  your financial circumstances change significantly. Checking will help you to identify your need to re-balance your asset mix or reconsider some of your specific investments.

Setting and maintaining your strategic asset allocation are among the most important rudiments to achieve long-term investment success.  Below are some tips to help you in diversifying your portfolio.

  1. Extend your wealth

Never put all your investment in one stock or sector, although equities are good. You should build your unique virtual mutual fund by investing in some companies you know, trust and even use daily. Knowing a company or using its goods and services can be a good approach to investing.

  1. Think of index fund or bond fund

Investing in securities that traces different indexes make a good long-term diversified investment for your portfolio. You may consider adding index funds or fixed-income funds to the mix. You are dodging more your portfolio against market volatility and uncertainty, through adding some fixed solutions.

  1. Continue building

If you have $10,000 at hand to invest, use dollar-cost averaging approach. This is used to smooth out the peaks and valleys created by market volatility, you invest cash regularly in a specified portfolio or funds. Add to your investment on a regular basis.

  1. Know when to leave

Stay current with your investments and keep in touch with the over-all market situations. Not because you have your investments on autopilot doesn’t mean you should ignore the forces at work, even though buying, holding and dollar-cost averaging sounds good strategies. You should know what is happening to the companies you invest in.

  1. Keep your eyes on commissions

You should understand and know what you are getting for the fees you are paying, if you are not the trading type of investor. Some companies attach a monthly fee, while others charge transaction fees. Be watchful and knowledgeable about what you are paying and what you are getting for it. You should keep in mind that the cheapest choice is now always the best.

Investing is a worthwhile thing to do if we take a disciplined approach, using diversification, buy-and-hold and dollar-cost-averaging strategies when investing. It can be fun to do even in the worst of times.