Weather you are new to investing or have been doing it for years its time to realize that the all types of investing markets have changed and its time to reevaluate or learn what your risk appetite is.
Many people say they only invest what they are comfortable with losing. However, sadly many of my clients come to me after they have had a loss only to have found out that saying it, meaning it and living it is very different.
In the first trading lesson on my website, I explain that good traders and investors need to leave their ego at the door. Most people feel their risk appetite is much higher then it really is. I teach all my clients to step back and think if every penny of this investment were lost how would it affect you life. At first the answer is always the same. “ It will not. I can handle it “ For my married clients I ask them how will their spouse handle it, will this investment bad or good put a strain in the relationship, will it alter the way you live , will it effect your kids future and MOST of all how will this investment effect your every day thinking.
For all investments, including trading, you should not lose any sleep, have seconds thoughts, or alter your life in any way shape or form. As a culture we all want to be able to tell people we made a killing or how you had an investment of a lifetime. But remember, in your lifetime you will make both good and bad investments. The key is to never make one that, if it goes wrong, can have a time line shift in your or your family’s future
Investing, like all things in life, is learned. No one just wakes up one morning and is a super star. For those of you just starting out in investing and trading, start with a small amount of money. Your skill level will grow over time. You will learn from mistakes that happen as well as things that are out of your control. You will see you skill level rising as issues happen - not only how you react but how quickly. Great investors and traders handle issue on the fly with confidence knowing that whatever come across their path they can deal with and many times work to their advantage. Being aware and properly managing your risk is important to keep your mind at peace, allowing you to make rational decisions instead of emotional and panicking decisions.
Investment Risk Level Checklist:
1) Is this money really money that can be forgotten about if lost
2) What is the reason for this investment –
3) Who brought this investment to you and what is their track record
4) Is this investment based on an emotional reaction or logic
5) Take you ego out and look at 1-4 again
6) Think of a worst case and can you live with it
7) Is there a way out of the investment if it starts going bad
8) How will you get out
9) Are you prepaid to hold the investment longer then the original plan
10) If all these add up to a yes then you are ready to make the next step
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