While most people failed to make market investment a success till the end, but few people do make it a success. Knowing what the factors that killed an investor are is critical at the very beginning then. These factors were published in previous articles on 7 Deadly Investor Killers. On the other hand, knowing there are good catalysts that keep an investor going in the path is also critically important. Seven of them are listed here that are essential and nonnegotiable to make a success for any investor.
1. Enjoy the process ~ The purpose or ultimate goal of investment is financial freedom. While this goal should be inspiring and convincing enough to make one started with investment career. Nevertheless no matter how inspiring and convincing this ambition may be, no one will be able to endure till the end if the process seems too tough or boring. Though success is the end product, but the process in getting there is no compromising. The process takes longer time than the goal itself.
Just like hiking a mountain, reaching the mountain top may be the ultimate purpose and exciting goal of the entire hiking project, but the entire project spend mostly in the process. Reaching the top is just a momentous event. Only when one learns to enjoy the surrounding beauty and the scenery while ascending make the hiking process interesting and endurable. Without such interest, reaching mountain top becomes harder and unendurable.
Similarly the entire life project of investment takes most of its effort in the process of monitoring portfolio with attention paying to the surrounding economic activities. Until a person finds it interesting in economic matters, financial management, detailing monetary calculation, reaching financial freedom through market investment will be impossible to endure.
2. Mathematically incline ~ Investment is dealing with money. It comes with dollars and cents. No one will be able to escape calculation of figures to its decimal and percentages. The rate of return, losses and profits, capital growth and depreciation, and the others are all dealt with detail calculation just like a businessman. Without simple calculation skill, no one can become a successful businessman.
Therefore, investors should have an interest in mathematical calculation. Though it does not require sophisticated formula in the business of investment, it is nonetheless, the most essential and fundamental condition of doing market investment.
3. Technically Interested ~ investment is never a loose activity that anyone can come and jingle around, takes some profit and walk away. It requires discipline in keeping record of all transaction, past historical tracking and related events that cause profit and losses to one’s investment. The use of Excel data file tracking would be handy enough to keep notes and records of all buying and selling activities, as well as keeping all entry prices intact. These are all part of the parcel in the business of investment.
If anyone wants to analyze any financial condition of a market, company, or mutual funds, tracing financial data involve technicality. Even the process of keeping one updated of any news related events to his investment can still be considered a technical activity in his daily life. As a reason, if anyone desires to be successful in investment, he must be a technically inclined person. Without such condition, investment becomes an impossible mission.
4. Take losses as meaningful process ~ Just like a business, losses and profits are just a part of the essential experience while keeping the business going. No one businessman will expect his business to take profit all the time. But the only criteria is that he has to make sure losses are not exceeding profit for a designated period of time. This is the same way for investment, the person must take losses realized willingly and happily as part of the investment process. Cut loss is one of the strategies involves the requirement of taking losses willingly.
Cut loss means preventing any investment from incurring largest losses out of unintentional error in investment decision or judgment. No matter how intelligent and diligent anyone makes his study prior to his investment decision, there will always be uncontrollable or unexpected factors out there in the market that can cause tremendous losses to any investment. This can happen to anyone including legendary value investor like Warren Buffet. If anyone who is not willing to turn from paper losses into realized losses sooner possible, he will suffer failure once his account is ruined after losses accumulated beyond endurable level.
5. Reflective mentality ~ investment involves a lot of rational activities. Contrasting to gambling where pure luck or fortune of the day is the only factor that make one winning the game, stock, mutual fund or any investment vehicle takes a lot of mental skill. Reflection or evaluation on past performances in investment is also highly required if anyone desire to be successful in investment. Only a reflective person will be able to avoid making the same silly mistake twice. Any mistake in investment is costly. Too many silly mistakes will ruin a person’s account. Only reflection will create self-awareness and improvement in the skill of investment. This is the major difference between a gambler and an experienced or successful investors.
6. Pay the price ~ Though investment doesn’t take sweat like a labor intensive job, but it does take heavy prices in the area of mental effort. It sometimes takes pain and sweat in the sense of heartbreaking experiences in order to move from one level to another. Disappointment and losses may come one after another when markets are not moving favorably. These are all common experiences to all investors before they can turn up a success.
If such experience happened, especially heavy losses come, he is advisable to take a break from the investment activity for some period of time. An emotional bruised off person is not a good fit for investment. Least he will play the game of revenge and causes even larger or fatal losses.
Understanding that losses is part of the process any investor have to pay. This is also positive that one day in the future he will be able to boost on how large the lost he has experienced when he was an immature investor.
7. Take any success as temporary event, keep humble all the way ~ Self-confidence of all immature investor will be raised whenever large profit come in out of his initial investment. Profits are always encouraging and irresistible.
Anyone who enters the market at a favorable market condition with incidentally correct entries will be able to gain profit. But the danger comes when he continues to gain profit consistently without the experience of any set back. He would have the urge to increase his capital thinking to achieve his fortune sooner than expected.
Very few immature investor will understand that market has its snare to take away anyone capital instantaneously regardless how much he gained from the market in the past in just one market drop. It is advisable then to approach market investment with the expectation of losses initially. This is always a healthier beginning of investment career than gaining profit too fast, too much and too soon.
If you are experiencing losses here and there, as a beginner, take courage, learn the reason and move on. You have a healthy start in the investment career. You are most probably not alone, all others are experiencing the same thing.
If you find yourself any or some of the above categories disturbing, you may want to evaluate the condition of your heart and motive. If it is adjustable, you are still able to achieve financial freedom through market investment. If not, you are most probably not suitable in this game of market investment.
Nevertheless, it doesn’t mean you cannot achieve financial freedom in life. There are always other means such as property, business joint venture and others. God is fair and good to anyone who has a heart to learn.
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