Syndicate
Your Psychological Profile
To be successful with your investments, you must be totally sincere when describing your personal psychological profile, this referred to the disposition you have to accept risks. The normal is for conservative investors to be more preoccupied with the possibility of a loss than for the rate of return and, in consequence, will prefer to invest in safe fixed interest securities, as are, for example, long-term treasury bonds.
The investor with a speculating spirit, on the contrary, always seeks a high return and, to achieve it, he doesn’t care about the risks he will have to go through; it is not unusual for the portfolio of this kind of investor to be mainly composed by shares of companies that are actually in a clear expansion and, for it, with perspectives of increasing its quotations. The investor that accepts a moderate risk seeks generally a balanced portfolio; portfolio that usually is composed, in a way of balancing risk and profitability, by a percentage in bonds and debentures equal to 100 less than the age of the investor, being the complementary percentage represented in two thirds by securities of high capitalization and the other one third by shares of growing companies.
Independently from the type of investor that you think you are, don’t forget of this old saying that circulates around the stock exchange markets: “If you are worried for your investments, don’t stop selling until obtaining a good night sleep”.
Certain consideration might help you determine the type of investor that you are. The first is referred to the time and it is very simple: which is the temporary horizon for each of the investments? When will you need your invested funds for other use? Do you invest thinking on your retirement or for the long term buying of a house?
It is very important to have a clear idea as how the time intervenes in the achievement of your objectives, overall when compounded interests are in game.
Think that 25,000 dollars invested at a compound interest of 6% will become in 44,770 dollars in a lapse of time of 10 years, 80,180 dollars in 20 years and in 143,590 dollars at the 30 years.
At a rate of return of 10% the same amount in a lapse of time of ten years would become in 64,845 dollars, 168,190 dollars in 20 years and 436,235 dollars in 30 years.
The legendary market speculator, Jesse Livermore, was in favor of taking advantage of public quotation in times that they were truly favorable and would say that the average investor should only go too the market three or four times a year. Livermore made and lost six fortunes and died ruined on 1941.
The statistics show us that the strategy of taking advantage of the ups and downs of the market implies a greater risk for investments than that of buying securities and to maintain them during long term.
The most recent analysis show that if an investor would have maintained away from the market during its 40 best days of quotations in the period comprehended between 1982 and 1998, his earnings would have been reduced in almost an 80% according to the activity results of the Standard & Poor?s 500.