Don’t Sabotage Your Investment Success By Giving Into Greed
Many investors sabotage their long-term returns by giving in to greed. Usually, this happens when they are young and impatient for results - which is ironic, because this is the most important time in your life to invest properly.
An experienced investor realizes that investing is a life-long process that yields big dividends over decades. Most of the profits come from compounding - i.e. the return on money that was itself a return on your principle. Therefore, it is critical to invest effectively as early as possible.
When a seasoned investor looks back on a ten-year-old investment mistake that, at the time, cost them $10,000, they realize that they actually lost more than $10,000. They also lost the compounding power of all the dollars that would have been spun off from the $10,000 over the course of the decade.
Unfortunately, when they actually made the mistake, they were not thinking of the consequences ten years down the road. Instead, they were most likely thinking of getting rich NOW, and made the mistake by being too aggressive and reckless.
Here are some of the common mistakes that young, aggressive investors make:
1. Day trading - Technically, day trading is buying and then selling a stock in the same day. In practice, this term is also used to describe aggressive short term trading where a trader jumps in and out of positions within days. Either way, this is a mistake for most people because stocks are harder to predict over the short term, fees are higher relative to profits, and traders are more vulnerable to technical glitches outside their control.
2. Futures and options trading - Most investors should avoid trading these products because they are highly leveraged. For example, corn is actually less volatile than a stock. This makes sense, because there are more factors that influence IBM than a simple food like corn. However, while you can buy a single share of IBM, you cannot buy a future on a single ear of corn. Instead, you have to buy corn contracts of 5,000 bushels each. Trading these large quantities means that you make or lose a lot of money with small, random price fluctuations.
3. Excessive position sizes - This is when an investor does not diversify. For example, they see Google going up, so they invest all their money in Google. This is reckless, dangerous, and a form of gambling - not investing. You never want to be dependent on one stock, because anything outside your control can happen. Instead, you want to create a method that gives you an edge over the market, and then use this system to trade multiple positions to guard against factors outside your control.
4. Leverage - Related to 2 and 3, you want to avoid using leverage. You should assume that there is a 100% chance that your investments, at some point, will fall in value. If you used borrowed funds, you might be forced to sell positions at a bad time. It is better to use your own funds and be in change of your own destiny.
5. Excessive turnover - This is when an investor panics and sells a stock on a short-term dip and/or sells a stock after a small gain. Many times, the stock will come back up, and the stock that made a small gain will continue to climb. The best way to invest is to eliminate all-or-nothing thinking. Instead of buying or selling an investment all at once, create a method to buy and sell stock in increments.
6. Seminar junkie - This is where an investor gets hooked on buying books, DVD's, and seminars on trading and investing. An investor falling in this trap is like someone who pursues multiple graduate degrees in college because he or she is afraid of actually attempting something. It becomes a form of entertainment to learn new technical indicators or trading systems. The problem is that you lose time and money that could have been better spent.
7. Don't quit your day job - If you have investment success, you may be tempted to quit your job for a year or two and live off your profits. Don't do it! Keep working until you have 20 times your salary. At that point, you can realistically hope to live permanently off your portfolio without exhausting it.
An experienced investor realizes that investing is a life-long process that yields big dividends over decades. Most of the profits come from compounding - i.e. the return on money that was itself a return on your principle. Therefore, it is critical to invest effectively as early as possible.
When a seasoned investor looks back on a ten-year-old investment mistake that, at the time, cost them $10,000, they realize that they actually lost more than $10,000. They also lost the compounding power of all the dollars that would have been spun off from the $10,000 over the course of the decade.
Unfortunately, when they actually made the mistake, they were not thinking of the consequences ten years down the road. Instead, they were most likely thinking of getting rich NOW, and made the mistake by being too aggressive and reckless.
Here are some of the common mistakes that young, aggressive investors make:
1. Day trading - Technically, day trading is buying and then selling a stock in the same day. In practice, this term is also used to describe aggressive short term trading where a trader jumps in and out of positions within days. Either way, this is a mistake for most people because stocks are harder to predict over the short term, fees are higher relative to profits, and traders are more vulnerable to technical glitches outside their control.
2. Futures and options trading - Most investors should avoid trading these products because they are highly leveraged. For example, corn is actually less volatile than a stock. This makes sense, because there are more factors that influence IBM than a simple food like corn. However, while you can buy a single share of IBM, you cannot buy a future on a single ear of corn. Instead, you have to buy corn contracts of 5,000 bushels each. Trading these large quantities means that you make or lose a lot of money with small, random price fluctuations.
3. Excessive position sizes - This is when an investor does not diversify. For example, they see Google going up, so they invest all their money in Google. This is reckless, dangerous, and a form of gambling - not investing. You never want to be dependent on one stock, because anything outside your control can happen. Instead, you want to create a method that gives you an edge over the market, and then use this system to trade multiple positions to guard against factors outside your control.
4. Leverage - Related to 2 and 3, you want to avoid using leverage. You should assume that there is a 100% chance that your investments, at some point, will fall in value. If you used borrowed funds, you might be forced to sell positions at a bad time. It is better to use your own funds and be in change of your own destiny.
5. Excessive turnover - This is when an investor panics and sells a stock on a short-term dip and/or sells a stock after a small gain. Many times, the stock will come back up, and the stock that made a small gain will continue to climb. The best way to invest is to eliminate all-or-nothing thinking. Instead of buying or selling an investment all at once, create a method to buy and sell stock in increments.
6. Seminar junkie - This is where an investor gets hooked on buying books, DVD's, and seminars on trading and investing. An investor falling in this trap is like someone who pursues multiple graduate degrees in college because he or she is afraid of actually attempting something. It becomes a form of entertainment to learn new technical indicators or trading systems. The problem is that you lose time and money that could have been better spent.
7. Don't quit your day job - If you have investment success, you may be tempted to quit your job for a year or two and live off your profits. Don't do it! Keep working until you have 20 times your salary. At that point, you can realistically hope to live permanently off your portfolio without exhausting it.
Money Inflation Gold
We have been raised to believe that inflation is a natural phenomenon, but in fact it is a hidden, regressive form of taxation. It is government siphoning away resources from people and spending it without their recognizing it. Why do I say this? And is inflation bad or good?
First, a couple of basics. What is money, for example? Money is a store of value that makes it easier for people providing various goods and services to do business with each other. The smoother the process, the more goods and services there are for everyone. Money must have a generally recognized value and quality so that negotiating parties need not negotiate over that part of the transaction. When money and goods are beyond any individual's control, the market will naturally assign values to products based on what people want.
This is the most efficient form of market, and it will create the most value overall as people energetically compete for wealth. But the economy is rarely permitted to operate in this way. Government steps into the economy in many ways. To put one form of intervention very simply, governments take money away from some people by taxation and give money to others through entitlement programs or simply by spending.
Every time government takes money from successful individuals and gives it to less successful individuals or enterprises, it imposes two inefficiencies. It "punishes" successful actions by imposing costs on them, and it "rewards" unsuccessful actions by subsidizing them. I use the quotation marks because "punishment" and "reward" sound so intentional, whereas in reality most of the interesting features of government spending lie in the area of "unintended consequences." But the economic effect is the same, so naturally taxing and spending create factions of people vying for government largesse or to avoid taxation. There are political consequences for all taxing and spending, and they provide some checks and balances for one another. It is the natural political give and take in a democracy.
But it is also natural for governments in control to try to please as many people as possible while offending as few as possible, and this is made easier if taxation can be hidden. Then government can give to discrete subgroups, pleasing them, without the cost of alienating other groups. How can this be done?
When money is beyond the control of government, the cost of government is relatively obvious because every dollar commanded by government is a dollar subtracted from somewhere else, and the factions are competing for discrete funds. But what happens when government is free to create money out of thin air? This is called "fiat" currency (as opposed to "commodity" currency). Fiat currency depends upon the stability (to survive) and integrity (not to overprint) of the government assigning it value, whereas commodity currency depends on the underlying value or rarity of the commodity independent of government. People in the U.S. now seem to regard fiat currency as a natural and permanent right of government, and a good thing, but historically it is a fairly recent development (and one which was heartily distrusted by the Founding Fathers).
Fiat currency allows inflation, which is the creation of currency at a rate faster than the economy grows.
Let's take a very simple example. If an island has $100 on it and $100 worth of goods, what happens if the island's people learn how to create goods worth $10, while the government prints up an additional $10 in currency? Nothing. The economy has grown, and the currency has expanded in lockstep. The currency retains its familiar value, and so do the goods.
But what if government prints up an additional $100 and distributes it without the accompanying increase in the amount of goods? This is inflation, an increase of money relative to existing goods. The price of all the goods will eventually double to reflect the increase in money relative to goods.
The real question in this model is how the money is distributed, since who gets it, or who gets it first (before the prices reflect the inflation) will certainly redistribute actual wealth. For example, what if the government gave all the money to the twenty percent of the people on the island who owned huts? In that case, not only would the money not actually increase the net wealth of the island, but it would also effectively redistribute wealth from renters to owners. If the government could sufficiently hide the process, it could make the owners happy without actively antagonizing the renters. I hope the parallels between this hypothetical island and the actions of the U.S. government over the past several years (for example) are obvious.
When the government operates at a deficit, what it is doing by definition is spending money without having taxed it out of anybody first. It is printing money into existence and spending it. Because it is spending it in various ways it makes the receiving classes (owners and selected welfare groups) happy. It is actively and thoroughly redistributing income, but doing so in a way which very few people understand. People think of it as giving without taking, but government can never actually do this. Because it is spending without previously taxing, there is no political cost for taking the money and spending it-no counterweight to restrain government. The result is a naturally increasing tendency to inflate and spend.
Not only does inflating and spending redistribute the wealth in unexamined ways, it also skews the economy, increasingly "punishing" economically viable actions and "rewarding" economically foolish actions or conditions. It should be no surprise that all currencies that have gone into this inflationary spiral unchecked have perished, with dramatically negative consequences for the people and countries who possessed the currency. Because the United States has begun this process, a spirit of self-preservation strongly suggests reducing your holdings of fiat currency and increasing your holdings of commodity currency.
Gold is the primary form of commodity currency in the world.
First, a couple of basics. What is money, for example? Money is a store of value that makes it easier for people providing various goods and services to do business with each other. The smoother the process, the more goods and services there are for everyone. Money must have a generally recognized value and quality so that negotiating parties need not negotiate over that part of the transaction. When money and goods are beyond any individual's control, the market will naturally assign values to products based on what people want.
This is the most efficient form of market, and it will create the most value overall as people energetically compete for wealth. But the economy is rarely permitted to operate in this way. Government steps into the economy in many ways. To put one form of intervention very simply, governments take money away from some people by taxation and give money to others through entitlement programs or simply by spending.
Every time government takes money from successful individuals and gives it to less successful individuals or enterprises, it imposes two inefficiencies. It "punishes" successful actions by imposing costs on them, and it "rewards" unsuccessful actions by subsidizing them. I use the quotation marks because "punishment" and "reward" sound so intentional, whereas in reality most of the interesting features of government spending lie in the area of "unintended consequences." But the economic effect is the same, so naturally taxing and spending create factions of people vying for government largesse or to avoid taxation. There are political consequences for all taxing and spending, and they provide some checks and balances for one another. It is the natural political give and take in a democracy.
But it is also natural for governments in control to try to please as many people as possible while offending as few as possible, and this is made easier if taxation can be hidden. Then government can give to discrete subgroups, pleasing them, without the cost of alienating other groups. How can this be done?
When money is beyond the control of government, the cost of government is relatively obvious because every dollar commanded by government is a dollar subtracted from somewhere else, and the factions are competing for discrete funds. But what happens when government is free to create money out of thin air? This is called "fiat" currency (as opposed to "commodity" currency). Fiat currency depends upon the stability (to survive) and integrity (not to overprint) of the government assigning it value, whereas commodity currency depends on the underlying value or rarity of the commodity independent of government. People in the U.S. now seem to regard fiat currency as a natural and permanent right of government, and a good thing, but historically it is a fairly recent development (and one which was heartily distrusted by the Founding Fathers).
Fiat currency allows inflation, which is the creation of currency at a rate faster than the economy grows.
Let's take a very simple example. If an island has $100 on it and $100 worth of goods, what happens if the island's people learn how to create goods worth $10, while the government prints up an additional $10 in currency? Nothing. The economy has grown, and the currency has expanded in lockstep. The currency retains its familiar value, and so do the goods.
But what if government prints up an additional $100 and distributes it without the accompanying increase in the amount of goods? This is inflation, an increase of money relative to existing goods. The price of all the goods will eventually double to reflect the increase in money relative to goods.
The real question in this model is how the money is distributed, since who gets it, or who gets it first (before the prices reflect the inflation) will certainly redistribute actual wealth. For example, what if the government gave all the money to the twenty percent of the people on the island who owned huts? In that case, not only would the money not actually increase the net wealth of the island, but it would also effectively redistribute wealth from renters to owners. If the government could sufficiently hide the process, it could make the owners happy without actively antagonizing the renters. I hope the parallels between this hypothetical island and the actions of the U.S. government over the past several years (for example) are obvious.
When the government operates at a deficit, what it is doing by definition is spending money without having taxed it out of anybody first. It is printing money into existence and spending it. Because it is spending it in various ways it makes the receiving classes (owners and selected welfare groups) happy. It is actively and thoroughly redistributing income, but doing so in a way which very few people understand. People think of it as giving without taking, but government can never actually do this. Because it is spending without previously taxing, there is no political cost for taking the money and spending it-no counterweight to restrain government. The result is a naturally increasing tendency to inflate and spend.
Not only does inflating and spending redistribute the wealth in unexamined ways, it also skews the economy, increasingly "punishing" economically viable actions and "rewarding" economically foolish actions or conditions. It should be no surprise that all currencies that have gone into this inflationary spiral unchecked have perished, with dramatically negative consequences for the people and countries who possessed the currency. Because the United States has begun this process, a spirit of self-preservation strongly suggests reducing your holdings of fiat currency and increasing your holdings of commodity currency.
Gold is the primary form of commodity currency in the world.
Where To Start Making Money With Money
The first rule about making money with money is make a firm commitment (to yourself) to stick to the rules, come hell or high water, before you even start. Because, quite frankly, if you don't stick to your plan, there's really no point in starting.
You may as well save yourself the angst and pain of setting yourself up for another failure that you can beat yourself up with for the next twenty years. C'mon, life's too short. Not every thing is for every body, so if putting a small amount of money aside each month, for the purpose of making more money, is something you don't want to do, or are not in a position to do, then pass on this.
However, if you are ready, willing and able to slot between $5 and $150 per month into your own system for making money with money... congratulations! You've come to the right place.
Like any good plan, this one needs some preparation before you begin. Grab yourself a piece of paper and answer these four questions. Forget the coffee, do this now.
You need to decide on the following:
1. How much to invest? How much cash do you want to devote to the noble task of making more money for you each month? Start small if you have to, there's no shame in that, and there's still meaningful work that a humble $5 can do for you in the beginning. However, it is only fair to say that the more you can start with, the more money your money will be making for you, and sooner.
2. How often to invest? How often do you want to put this money aside. Are you the "pay-by-the-month" type, or is a single annual payment more your thing? If you know that you are likely to overspend each month, and run out of cash before you run out of month, then I suggest you fund yourself as far ahead as you can (up to 12 months maximum) - so $5 per month would mean putting aside $60 now, and $150 per month, would mean putting aside $1,800 now. Whatever works for you, that is the amount to plan on funding your plan with up front.
3. How much income do I want? How much money do you want this money to eventually be making for you each month? Do you want enough to cover your car payment or your mortgage? Do you want to match your full-time income? Do you want a whole lot more than that?
4. How soon do I want to start living off my profits? How quickly do you want to be able to start living off the proceeds of your "make money with money" campaign? As you get clear on these points, you will see that you may need to make a few little adjustments to your first estimates, as your goals and preferences become more defined.
Once you have completed the above, you will have reached the destination point for this exercise - you will now know exactly where you want to start.
You may as well save yourself the angst and pain of setting yourself up for another failure that you can beat yourself up with for the next twenty years. C'mon, life's too short. Not every thing is for every body, so if putting a small amount of money aside each month, for the purpose of making more money, is something you don't want to do, or are not in a position to do, then pass on this.
However, if you are ready, willing and able to slot between $5 and $150 per month into your own system for making money with money... congratulations! You've come to the right place.
Like any good plan, this one needs some preparation before you begin. Grab yourself a piece of paper and answer these four questions. Forget the coffee, do this now.
You need to decide on the following:
1. How much to invest? How much cash do you want to devote to the noble task of making more money for you each month? Start small if you have to, there's no shame in that, and there's still meaningful work that a humble $5 can do for you in the beginning. However, it is only fair to say that the more you can start with, the more money your money will be making for you, and sooner.
2. How often to invest? How often do you want to put this money aside. Are you the "pay-by-the-month" type, or is a single annual payment more your thing? If you know that you are likely to overspend each month, and run out of cash before you run out of month, then I suggest you fund yourself as far ahead as you can (up to 12 months maximum) - so $5 per month would mean putting aside $60 now, and $150 per month, would mean putting aside $1,800 now. Whatever works for you, that is the amount to plan on funding your plan with up front.
3. How much income do I want? How much money do you want this money to eventually be making for you each month? Do you want enough to cover your car payment or your mortgage? Do you want to match your full-time income? Do you want a whole lot more than that?
4. How soon do I want to start living off my profits? How quickly do you want to be able to start living off the proceeds of your "make money with money" campaign? As you get clear on these points, you will see that you may need to make a few little adjustments to your first estimates, as your goals and preferences become more defined.
Once you have completed the above, you will have reached the destination point for this exercise - you will now know exactly where you want to start.
How To Learn Investing
Before you bet the farm and invest money in some investment scheme or stock you don't understand, learn investment basics and learn investing strategy. Investing money is not rocket science. Here's a basic money guide to help you start investing as an informed investor.
First learn investment basics. There are a vast number of investment options out there, but each can be simplified and evaluated to determine whether or not it fits your particular needs. To make sense of it all you need to first get a firm grasp of the following investment characteristics: liquidity, safety, growth, income, and tax advantages. Every investment can be evaluated by ranking it in terms of these characteristics.
Get a handle on stocks and bonds. These are two of the major investment options everyone needs to understand when investing money. Stock investing is geared to folks who want growth with liquidity. Bond investing features relative safety and high income. Notice that we just referred to the terms in step 1 to characterize these investment options.
Get up to speed on safe, liquid investments like money market securities and bank money market accounts. Every investment portfolio should include liquid safe assets as well as stocks and bonds.
Dig into the concept of alternative investments like gold, real estate, oil & gas and other commodities and tangibles. Foreign securities are included as alternative investments as well. These investment options can produce growth for investors when the stock market turns sour.
Now concentrate on learning mutual funds. This should be easy enough since you now understand the types of investments these funds invest money in. Mutual funds manage your money for you, but you need to pick the appropriate fund. Your basic choices are: stock funds, bond funds, money market funds, and balanced funds that invest in a combination of all of the above.
The final step is to learn investing strategy so you can manage and maintain a balanced investment portfolio ... at a level of risk you can live with. You will need to master investing tools and concepts like asset allocation, balance and rebalance, and dollar cost averaging.
If you follow the above steps, in order, the game of investing money will come together for you. Otherwise, you're likely to remain lost and confused like most folks. You can not start on page 47 of a novel and expect to understand the plot, can you?
First learn investment basics. There are a vast number of investment options out there, but each can be simplified and evaluated to determine whether or not it fits your particular needs. To make sense of it all you need to first get a firm grasp of the following investment characteristics: liquidity, safety, growth, income, and tax advantages. Every investment can be evaluated by ranking it in terms of these characteristics.
Get a handle on stocks and bonds. These are two of the major investment options everyone needs to understand when investing money. Stock investing is geared to folks who want growth with liquidity. Bond investing features relative safety and high income. Notice that we just referred to the terms in step 1 to characterize these investment options.
Get up to speed on safe, liquid investments like money market securities and bank money market accounts. Every investment portfolio should include liquid safe assets as well as stocks and bonds.
Dig into the concept of alternative investments like gold, real estate, oil & gas and other commodities and tangibles. Foreign securities are included as alternative investments as well. These investment options can produce growth for investors when the stock market turns sour.
Now concentrate on learning mutual funds. This should be easy enough since you now understand the types of investments these funds invest money in. Mutual funds manage your money for you, but you need to pick the appropriate fund. Your basic choices are: stock funds, bond funds, money market funds, and balanced funds that invest in a combination of all of the above.
The final step is to learn investing strategy so you can manage and maintain a balanced investment portfolio ... at a level of risk you can live with. You will need to master investing tools and concepts like asset allocation, balance and rebalance, and dollar cost averaging.
If you follow the above steps, in order, the game of investing money will come together for you. Otherwise, you're likely to remain lost and confused like most folks. You can not start on page 47 of a novel and expect to understand the plot, can you?
What Sort Of Investor Are You?
Investing your money is certainly a game. We are all taking a gamble with our money when we speculate on where we are going to invest and we do so in the hope that we are going to make some decent money at some point in the future. Let's face it, if this wasn't our end objective why would we bother to invest.
However, there is more to an investment than just speculating where to put your money and waiting. There is the journey and lots of people tend to ignore the fact that to make wealth you have to experience a journey. You need to go on a trip and that trip is full of many surprises and lots of ups and downs.
The Cool, Calm, Controlled Investor
If you are a calm, cool and collected investor you are prepared for your journey. You know and understand that you will have good days, weeks, months and years and you also know and understand that you will have bad days, weeks, months and years. But you will be prepared for this and accept this. You are focused on the end result. During turbulent times you stay calm. When the boat is rocking and you don't jump overboard. You hang on to the side and appreciate it when you come back into calm waters.
You hang on to your investments. Any short term gains and losses that are experienced throughout this journey are less relevant to you. You don't sell when you have made a few dollars to quickly reap a short term profit and you don't sell when you see your value dropping in bad times. You expect this to occur and you remain strongly focused on the benefits you will see when you achieve your end result and the wealth you will have one day down the track.
The Stressed, Anxious, Panicked Investor
If you are like a lot of people though, you find it very hard to remain cool, calm and controlled when you invest. Despite your best intentions, the slightest movement in the price of your investment sees you anxious to sell and to take the profits from any short term gains or to take flight and pull out after experiencing some short term losses. You are now focusing purely on today and have forgotten about your longer term plan and the journey you are taking to build up your wealth for the future.
Unfortunately there are dangers to these sorts of knee jerk reactions. People who have been through an unpleasant investment experience and lost money, generally retreat away from wealth creation all together. Doing this means they miss out on future opportunities as they won't have their money invested today ready to build wealth in the future to meet their long term goals. They also carry around a lot of negativity telling everyone they meet that investing is all too hard and too dangerous.
People who have made quick money are also in danger. Their expectation of investing is all sweet and rosy. They are likely then to make irrational decisions and take greater chances with their money in the expectation that their previous experience will be repeated. The danger with this is investment journeys aren't all uphill and these investors won't be prepared for the falls when they come along. They are too focused on today and making money overnight rather than remembering they were on a journey today to make wealth for tomorrow.
What sort of investor are you?
Are you able to ignore your journey to making wealth and ride out the good and bad times? Do you tend to focus on the short term or the long term? Do you count your losses / gains regularly? Do you forget your end goals and what it is you set off to achieve or do you remain focused on these? You can see it makes a huge difference if you are prepared for your journey and can understand the sort of experiences you will have as a long term investor.
However, there is more to an investment than just speculating where to put your money and waiting. There is the journey and lots of people tend to ignore the fact that to make wealth you have to experience a journey. You need to go on a trip and that trip is full of many surprises and lots of ups and downs.
The Cool, Calm, Controlled Investor
If you are a calm, cool and collected investor you are prepared for your journey. You know and understand that you will have good days, weeks, months and years and you also know and understand that you will have bad days, weeks, months and years. But you will be prepared for this and accept this. You are focused on the end result. During turbulent times you stay calm. When the boat is rocking and you don't jump overboard. You hang on to the side and appreciate it when you come back into calm waters.
You hang on to your investments. Any short term gains and losses that are experienced throughout this journey are less relevant to you. You don't sell when you have made a few dollars to quickly reap a short term profit and you don't sell when you see your value dropping in bad times. You expect this to occur and you remain strongly focused on the benefits you will see when you achieve your end result and the wealth you will have one day down the track.
The Stressed, Anxious, Panicked Investor
If you are like a lot of people though, you find it very hard to remain cool, calm and controlled when you invest. Despite your best intentions, the slightest movement in the price of your investment sees you anxious to sell and to take the profits from any short term gains or to take flight and pull out after experiencing some short term losses. You are now focusing purely on today and have forgotten about your longer term plan and the journey you are taking to build up your wealth for the future.
Unfortunately there are dangers to these sorts of knee jerk reactions. People who have been through an unpleasant investment experience and lost money, generally retreat away from wealth creation all together. Doing this means they miss out on future opportunities as they won't have their money invested today ready to build wealth in the future to meet their long term goals. They also carry around a lot of negativity telling everyone they meet that investing is all too hard and too dangerous.
People who have made quick money are also in danger. Their expectation of investing is all sweet and rosy. They are likely then to make irrational decisions and take greater chances with their money in the expectation that their previous experience will be repeated. The danger with this is investment journeys aren't all uphill and these investors won't be prepared for the falls when they come along. They are too focused on today and making money overnight rather than remembering they were on a journey today to make wealth for tomorrow.
What sort of investor are you?
Are you able to ignore your journey to making wealth and ride out the good and bad times? Do you tend to focus on the short term or the long term? Do you count your losses / gains regularly? Do you forget your end goals and what it is you set off to achieve or do you remain focused on these? You can see it makes a huge difference if you are prepared for your journey and can understand the sort of experiences you will have as a long term investor.
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