This is a guest post from Andrew Altman. Andrew is the editor-in-chief of an informational website SlickBucks.com. SlickBucks aims to help beginner investors and traders by reviewing financial products and brokerages, sharing advice and tips and publishing helpful guides for new investors and help them to get the kind of financial wealth they desire.
Whenever you’re ready to start investing is the ideal moment to begin your investing career. There may be some who have the idea that investing is only an old man’s game, but nothing could be further from the truth.
Your ability to secure massive profit through a successful investing career is one and the same with your commitment to continuing a lifetime of learning the craft – thankfully, years of mastery in the craft are not the entry gateway to the practice as a whole.
You only need to make one or two hours of focus on studying investing per day to make massive progress towards your fullest potential as an investor, and that begins simply by making a point to understand several core principles of the practice.
When you’re investing with any kind of commodity in the world, risk management is the universal law of every aspect of your practice. You will never encounter even a single moment of your investing experience that isn’t inextricably tied to the concept of managing what your stand to gain with what you stand to lose.
Be aware that even if you aren’t consciously thinking of risk management, the concept is still very much dictating the entirety of what it is that will manifest as your ultimate investing success.
Understanding the truth of risk management is a simple matter of visualizing a scale. One one end of the scale, you have the weight of what it is that you stand to gain if your investment bears fruit. On the other end of the scale, what you have is the weight of what you stand to lose if your investment turns out to fail.
The factors that weigh into what your ratio of failure to the chance of success may be will always vary, but ultimately, your task will be to determine just whether or not the likelihood of what you stand to gain is truly that much heavier than the risk taken on by engaging in the investment strategy in the first place.
Do keep in mind that the factors comprising risk management aren’t just limited to the monetary values of what it is that you could wind up profiting or losing, but the very chance that you have of experiencing either or scenario in the first place.
Even in a situation in which you do stand to gain more profit than the raw capital that would be volunteered to make such a chance possible, ask yourself: “is my chance of gaining what I stand to profit from here truly worth what I could very well lose permanently?”
Depending on the investors that you study, chances are that you’ll come away with more than one perspective on the implications of taking either riskier or safer trading strategies. No matter what school of thought you subscribe to when it comes to the notion of whether a riskier or safer investment style is worth it, your ultimate decision should be one that is wholly based in conviction and accurate data.
Emotional control is key
It’s fine and well to know the basic principles of risk management, but your ability to follow through on your risk management knowledge will come down to a matter of how well you’re able to control the flow of your nervous emotions.
On good days, you might be so confident that you take on risks that you would never have considered were you not on Cloud 9. On unfortunate days, you might have a less favorable outlook toward investment prospects that have an ideal chance of reward-to-risk for your portfolio; naturally, missing out on opportunities is no more productive than actively cutting your account to shreds due to overly risking trading.
Investing without getting taken over by your emotions is certainly no easy task; it is something that even the veterans in the investment world need to continually put an effort toward sharpening and consolidating.
One of the best ways to keep your emotions on a leash so that they don’t muddy your “investing consciousness” is to make an effort to write down your thoughts as they appear. Keeping a journal may feel slightly awkward if you’ve haven’t gotten much experience with it, but if you do it consistently, you can become much better at putting the way that you feel into an objective frame from which they don’t have the power to blur your rationale.
Fear and greed are the titanic forces that rule the market. All returns on investment are fueled by the rise and fall of emotional spikes and depressions throughout the economy, and as an investor, your power is in your ability to observe this massive flux instead of allowing it to control you at a crucial moment.
You cannot control the market, but at the same time, you can control the level of awareness that you have about just what kind of endeavor you’re taking on with each and every investment prospect.
Arm yourself with the full scope of knowledge surrounding every factor that determines your trade’s risk:benefit ratio, manage this ratio with as much impartial objectivity as possible, and you will already be leagues ahead of every other trader out there with years of experience who has not yet learned how to manage their emotions wisely.
How do I start investing now?
If you haven’t already begun, then thinking of all of the things that might factor into your “worthiness” to begin your investing career can easily be the most difficult aspect of your investing career that you’ll ever experience in general.
You may be wondering about how much money you’ll need to begin investing properly. The questions of whether your should invest in one commodity or currency over another or choose a broker over an online brokerage or app may cause you to lose several nights of sleep. Ultimately, what you want to do is come to an objective base of understanding about two things:
-What amount of money can I leverage in the good consciousness of possibly losing for the sake of learning?
-What can I be motivated to learn more about as a concept?
The answer to the first question will determine your perfect starting account balance. The answer to the second question will determine the commodity that you are best-suited to building your investing career around.
How to get in touch with Andrew
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