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Guarding Your Wealth for Senior Citizens
Market Survival Tips: Look at These Traits of
Successful Investors
Rarely is casual investor successful, professional
has different approach
By Jeffrey D. Voudrie, CFP
 Nov. 16, 2007 - To say that the stock markets have
been volatile lately is an understatement. If you’re like most
investors, you may be wondering if you should stay the course or cut
your losses. There are several traits that successful investors have and
understanding them will help you increase your chances of success.
Investing in the stock market isn’t a game. Nor is
it gambling. Frankly, it’s no different than any other occupation or
hobby that you might have. If you want to be good at it you must be
willing to invest time, effort and money.
If you’re unable to do so then you are probably
better off hiring a professional to do it for you. Even then, though,
it’s vital that you learn enough to understand what the professional is
doing and why. Otherwise you won’t be able to properly oversee the
manager.
There is a big difference between a casual investor
and a successful investor - rarely is the casual investor successful.
Here are the major differences I see in approach taken by casual and
successful investors.
Successful investors understand the markets that
they invest in.
Successful investors are students of the market.
Their first investment is one of time. They read about the relationship
between stock prices and the economy.
They know that different types of companies perform
best in different parts of the business cycle. They know the advantages
and disadvantages of investing in large companies versus small
companies; foreign versus domestic.
The casual investor just has a cursory
understanding of what causes the market to move. Since their knowledge
is limited, they are much more easily swayed by the talking heads on
television or the latest stock tip.
Knowledge is what allows the successful investor to
wade through the volume of information and sift out what is relevant.
Successful stock market investors start by
developing a plan.
In the military it’s called a Battle Plan. In
business it’s called a Business Plan. Successful investors have an
overall plan that guides their decisions.
They may focus on short-term or long-term trends
and develop plans of how to profit from them. Before they enter a trade
they know the conditions under which the investment will be sold.
They have identified the strategies and techniques
that will be used. For instance, buy and hold might be used on some
investments, indexing on others and trading techniques on the rest.
They’ve decided how much they will have in foreign versus domestic and
they know the maximum they will invest in each position.
The casual investor doesn’t have a plan. They make
decisions based on what is happening that day or that week. They often
aren’t sure of the strategy they will use in managing the investment.
Each investment should be part of an overall plan.
Successful stock market investors aren’t afraid
of losing money.
Casual investors feel they must make money on every
trade. Not successful investors. Successful investors realize that they
will lose money on some trades. They may even lose money on more trades
than they win.
Successful investors recognize that the key is to
make more on their winning trades than they lose on their losing ones.
Whereas the casual investor might hang on to a stock too long in hopes
of making money or breaking even, the successful investor is willing to
take the loss.
The decision to take a loss, though, isn’t based on
emotion, but on the principles in their overall plan.
Successful stock market investors control their
risk.
Successful investors utilize various methods to
control their risk of loss. First, they limit the percentage of their
portfolio that they will invest in any one stock. Then they may make use
of stop-loss or trailing stop-loss orders.
They might hedge by owning a non-correlating asset
or by buying a put option. And the methods used are determined by their
overall plan.
Casual investors often don’t even know how to
measure their risk.
Successful investors analyze their winners and
losers and seek to continually improve their techniques.
They aren’t married to any single method. They
recognize that just because something worked today doesn’t mean that it
will work tomorrow. They don’t allow a losing trade to throw them off
course. Each one provides valuable experience they can apply in the next
trade.
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
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