Are You A Stock Market Investor?
Sure, there are stories you might hear about people who bought XYZ Company stock for $5 and sold it 60 days later for $50 a share. This scenario has likely happened, but it is not a common experience for an average investor. The following points should be considered when you plan to become an investor.
Are you a self-disciplined thinker?
The first step anyone must take into account is their own personality. Are you the type of person who is organized in your thought process? Do you know the exact amount of money you have available to invest? Do you know how to set objectives in your finances? Have you set goals for savings and followed through on them? An investor has to have a clear set of objectives in their choice of investments. Is the amount of money you intend to invest a one-time windfall? Are you able to set aside a set quantity of money each month for investing that is disposable income?
What you will be doing is transferring some of your pass book savings to an investment. Patterns develop in peoples' lives. Are you able to modify 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 income and expenditures and decide how much money is disposable income (what isn't essential). It is this excess that you will be investing.
Are you able to set goals and listen to good advice?
Once you have determined that investing may be a possible pursuit, the second step is setting goals. A goal is the objective of your investment. Do you desire retirement, a vacation home, a new boat or a college fund for your grandchildren? Whatever it is will determine the type of investing you will need to 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 be suitable. The important part of this step is to know your objectives for which you will create a plan or a budget.
All of the major fund companies have managers and consultants. Are you willing to ask for advice in picking out a fund that will fit your needs? Don't take this to mean that you should settle for the first consultant who answers your call. Can you listen to advice and make a decision based on the choices 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?
The final part of this step is can you make a final decision? Many people are comfortable entering a car dealership and buying a $30,000 car based on their preferences, but when it comes to investing, the purchase is not as visual and exciting. It takes careful consideration to commit $30,000 to an investment in paper form.
Can you let go?
The final and most important aspect of deciding if you are a stock investor is... YOU. After you have completed all of the self-analysis, goals, research and advice of others and made your final decision, you have one more critical step. Do you have the personality to allow your investments to take their course? 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 online account to sell if the price goes down.
The mutual fund investment works differently that buying individual stocks. If you are satisfied that your choice of fund meets all of your criteria for investing, leave it alone and review it only periodically. If, for any reason, your mutual fund encounters unexpected long term problems, only then should you switch 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 in order to have a lifetime of success in the stock market. If you have it, it works. If you don't, I recommend you look into other types of investments.
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