The global financial markets can be difficult to navigate. Each day, investors monitor the fundamental indicators and technical trends in order to predict future price movements of financial assets. As the boom-and-bust nature of the financial markets have clearly demonstrated over the years, it’s not always easy to trade successfully.
Luckily, on the subject of investing, the pros have taught us a lot over the years. Many of their “secrets” are very intuitive, but not always implemented due to the emotional aspect of trading. The following list is a good starting point for novice traders, as well as a reminder for experienced investors who have lost more than they’ve made in the market.
1. Know What Kind of an Investor You Are
Understanding the type of investor you are is just as important as the financial assets you choose to buy and sell. That was the message of globally renowned economist and professional investor Benjamin Graham, who in 1949 authored The Intelligent Investor, which is still considered the Bible of value investing. Graham told investors they need to know what type of investor they are – defensive or enterprising. The difference simply boiled down to how much time and energy an investor had to devote to the financial markets.
Those with less time (defensive or passive investors) will minimize their risk exposure and stick to assets that allow them to benefit from all areas of the market. Those with more time (enterprising or active investors) will put in more work into researching and analyzing the markets. After all, the more work you do, the higher your potential return should be.
2. Know Your Plan, Stick with It
Understanding why you are investing and having clearly stated goals are just as important as knowing whether you are a passive or active investor. Every investor should have an end-goal in mind. Are you saving for retirement, investing in your children’s education or trying to earn an income from trading? Having clearly stated goals is the first step to building wealth through the financial markets.
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