Practice Is the Only Way to Investment Pro2012 Feb 27
Investment Managers and Practice
If you are not a quite investment professional you should read the previous article, which teaches how to invest if you are an amateur at investing; but you can’t continue like this lifelong and sooner or later you have to learn more about investment.
Every beginner at investing should work consistently on improving his investment skills by learning more and more as possible, as long as he becomes one of professionals. However, in my opinion no one will ever becomes a real investment professional without investing his own money. There are a lot of investment managers that are managing millions or billions dollars worth assets, but they never invested any dollar of their own. And I think such managers are worthless as long as they feel increasing charts and bonuses in good results, but they never feel the pain that comes when they lose all their money.
So, to become an investment pro you have to have a lot of practice in the field and there is no other way. In fact, if someone will say that you can practice on one of many investment games, I would say, don’t do that mistake. Those investment games will lead you in to mistaken risk interpretation and finally you will chose wrong risk tolerance level. That is the worst mistake that ever can happen. Correctly chosen risk tolerance is the key for further success of investing.
Investment Beginning with Real Money
And I am getting back again. Only the practice with real money can bring you forward in learning how to invest. Investment in your life is very important, and you cannot fail at this. Of course, there is a bad side of practicing with real money. And probably, you will lose some of those (let’s hope not all of them) sooner or later, depending on how fast do you surrender to the hazard, and depending on stock market cycle. But it is better to lose invested money sooner than later, when you will be investing larger money amounts.
That’s why you should start to invest with real money, but not all the money that are possible to invest. The beginning investments should not be very large, but they still have to be significant enough to not look like a game to you. You have to feel what the loss is and what the profit is. Such invested amount could be from two to four of yours monthly income depending on your temper and savings. And of course you should not invest in derivatives or other extremely risky investments, and do not chose Forex market trading.
When to Start Invest Serious Amounts?
It is normal to start investing large money amounts only when you are ready. And I would say you will be ready only then when you will know your real risk tolerance. And you will know your real risk tolerance only when you will face real losses. Real loss means not some depreciation of one stock in your investment portfolio, but it means the situation when your total portfolio will suffer the real power of stock market crash and market of bears. Only then you are ready to choose correct risk tolerance and chose proper asset allocation for you investment portfolio. And one more suggestion: avoid buying on margin…
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