Monday, September 21, 2015

Where to Start

The question is where to start down the investment road? The answer is with serious soul searching. This is where you should start. Serious thinking is required here. Some of the questions that should be contemplated are:

1) Why are you investing? What do you want to accomplish?
2) When will you need the money that you are investing?
3) Can you stay committed to investments that you make?
4) How will you react to and deal with volatility?
5) Will you try to beat the markets?
6) How much risk can you take?
7) Who are you? Are you humble? Are you sure of yourself?
8) What type of investments/markets are you interested in?
9) Do you have any past experience? If so, what were your results?
10) How do you deal with mistakes and setbacks?
11) How disciplined are you?
12) How persistent are you? Are you a goal setter?
13) How will you deal with losses and/or gains?
14) Have you developed your approach?
15) How much knowledge do you have?
16) What are you expectations?
17) Are you aware of common investment pitfalls?
18) How do you react to news?
19) How much time and effort will you put into the process?
20) How will you gather information to make decisions?
21) What will you do if the market beats you?
22) What are your financial goals? What do you expect to accomplish financially from investing?
23) Are you comfortable making decisions that are not in sync with the market or other investors?
24) Are you willing to learn or do you know enough already?
25) Do you want to be an active or passive investor?
26) Is there a specific investment strategy that appeals to you?
27) As an investor do you know what your advantages and disadvantages are vs. the markets or other investors?
28) Do you believe in luck, skill, probabilities?
29) How often will you make buy/sell decisions? On what criteria?
30) How much will you rely on forecasts-predictions?
31) Can you make decisions with less that complete information?
32) Will you take responsibility for your results?

The list goes on and on. How can you truly know the answers to some of these questions? The answer is you probably cannot know the answer to all of these questions until you are in the game. If you are in the game and have not been there before my suggestion would be to put less money at risk vs. more money at risk. Losing money is a decent way to focus attention and learn from mistakes. As for mistakes, it is easy to make them. Fortunately you do not have to perfect as you are going to make mistakes. All the investors I know of have made mistakes at one time or another. You should also realize that the answer to some of the questions listed here can/may/will change over time.

There are plenty of books and other material that can help you through this process and influence your thought process. Experts and others may/will influence you as well which may be good or bad. Reading and soul searching are linked here. I have found the study of psychology-behavioral economics to be helpful in learning about myself and my weaknesses. Self awareness is very important as well as the ability to deal with adversity, opposing information, confirmation bias, anchoring and other common pitfalls in the information gathering and decision making process.

In summary, the more work that is done here, the better off you will be. Be mindful of the fact that the work will take time measured in months, years, etc.

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