Over 80% of all individual investors lose money in a given time span of ten years. This figure is probably higher, since most people reluctance to reveal their losses. This article provides a broad overview of the financial landscape. Reflects the personal views of the author as an individual investor and author of a stock charting software with the experiences learned from the University of HK (hit hard). Use this article as the sole form of financial advice. Financial advice are available from authorized individuals and businesses, as required by law in your own country.
Investment is a statistical game. You win and sometimes you lose most of the time. To stay ahead, all you have to do is to make sure that your profits are more than you lose. More importantly, how to reduce losses and reduce the errors will be crucial in successful investing.
Take a typical fund manager. Of the ten positions, the fund manager can only win 40% of the time. Say, the manager makes an average return of 20% for each position. The rest are mistakes, but this manager capped the losses by 10% each. Do the simple math, and lo and behold, this manager is moving forward with profits. This is a simple example - professional fund managers use complex variations of this simple theme.
Another example is the venture capitalist. Say, of the ten companies, but succeeded. The company was successful return of 2000%, perhaps more productive. The remaining nine companies failed miserably and these investments are depreciated. Using this model, the venture capitalist is still ahead.
Headlines, media, advertising hype.
Most of us are familiar with this typical headline: "Whiz kid makes stock picks that most fund managers to outperform the market better." When such stories is front page news on the mainstream media, it is likely that they appear at the end of a great bull market. Stories like these characterize the misconception that anyone can pick stocks at random and win all the time.
Perhaps, a more enticing advertisement "How I 2600% (annualized) on a winning trade" may be interested to us. Any seasoned investor will be able to get a handful of transactions spectacular performance, such as 50% in a week has to offer. annualize this and it works to 2600% a year. But such transactions are few. There is no one in the world that such a method or strategy that is consistent and sustainable.
It is wise to deal with a critical mind and skepticism the media. Rationalisation of the possible reasons why the story appears a number of useful and not so clear understanding. For example, if you have a large position in a stock, then obviously you will only sing praises about why they will take to encourage buying. Momentum more her colleagues The author recalls a private analyst statement: "I can write great merits a reverse stock I can write some scathing things too."
Market gurus, financial astrology, divination.
Joseph Granville, a market technician, started his newsletter (Granville Market Letter) in 1963 and is still going strong at the age of 80 +. He was accurate to predict the market decline in 1976, but was wrong in 1982 and 1995. Given the statistical nature of investing, he had his successful talks and his fair share of blunders too. The good feature of this man must be willing to apologize to his. For his mistakes
Why do people continue to subscribe to his newsletter? This author suspects that his loyal customers are people who have their own opinions and views can form on the market, but they are susceptible to a different perspective or point of view they have missed in their own analyzes.
It's the same with other known market gurus. It seemed the media and the public are intolerant of their success rates as being not good enough. The estimates of this market gurus should be treated as a tsunami warning. Nine times out of ten, the warning appears to be false and people accept it and track with their normal lives. Each warning is taken seriously and the cost of taking precautions are minimal. When a warning proves to be accurate, it will save lives. It should be the same with predictions of market crashes this market gurus' are. Investors have to prepare just as they would with an impending tsunami warning. Itself
After seeing a BBC program on Membrane theory, May 11-dimensional worlds and parallel universes, financial astrology, feng shui and other methods of divination have some merit. This author recommends investors to have an open mind and, more importantly, understanding the strengths and weaknesses of each method. By taking advantage of the strengths, one can indeed enjoy the benefits.
The concluding part 2 will outline fundamental analysis, technical analysis, plus some tips on successful investing.
You may freely reprint this article provided you publish it in its entirety, including the author's bio and activating the link to the URL below.
The author, Stan Seecrets, is a veteran software developer with 25 + years experience in which specializes in protecting digital assets. He has real-time pricing systems developed and has witnessed the stock market collapse of 1987 and 2000/2001 in real-time. You can reach him via email (Stan Seecrets.biz).
© Copyright 2005, Stan Seecrets. All rights reserved.
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