Learn How Investing Money in Stocks Can be Profitable
Posted on February 09, 2011
Are you risk averse or can you tolerate risk? Answer this question and you are well on your way to understanding how investing money in stocks can be extremely rewarding. By knowing what type of investor you are means you can easily identify how you would like to invest your money. By this we mean you can summarise the amount of investment you are prepared to invest knowing full well that you could potentially lose it all.
Understanding what type of investor you are and the levels of risk you're comfortable with is the key to controlling your investment emotions. You also need to consider how active you would like to be. Are you a person that has time on their hands that is able to analyse the markets on a daily basis? Or are you just looking for value in investing money in stocks and holding your investments, but not really getting involved with the daily price action the market can throw at individual stocks? All of these factors must be considered when looking to invest money in the stock market.
Lots of banks and investment companies use profiling software that is in place to understand the type of person you are when it comes to investing your money. This software takes things like age, how much you're investing, amount you're prepared to risk, earnings and what things you're interested in (extreme sports or fishing for example- the software believes these are two different types of people!) They also want to know where you would like to invest if it was your choice for example the emerging markets - China - India - Brazil etc or would you be more comfortable investing where you know for e.g. Country of birth. It then takes all of this personal and financial information into consideration and gives you an investment score usually of between 1-5 with 1 being risk averse and 5 being risk adverse.
The problem I have with this whole investment strategy is that you are being interviewed by a person you hardly know so how do they know what my investing preferences are beyond a generalisation and can software really work out if we can tolerate financial risk? The investing sirens going off in my head tells me that a spotty kid that takes some details is about to pass my computer score on to a guy I don't even know to start investing my hard earned money in the stock market...no thanks!.
I think as aspiring traders you should be asking yourself the types of questions that banks ask when you have those financial planning meeting they pull you in for! Finding out some home truths about your true personal investment profile could help you with your personal investment portfolio. Be truthful as there is no one to impress when you ask yourself financial questions!
Today's Market Analysis Video
Market Overview
Running over the ES and the trading channel we can still see that the price actions are being contained. Philip explains the same patterns repeating themselves and points out the symmetry of the price action. We are erring on the side of caution as being at the top of the trading channel means we are not swinging the bat for the big home run trades.
We were asked by a subscriber to go through some potential short plays in the market and Philip explains the pros and cons of this type of position in the market.
Key things to remember when shorting:
1. Unlimited loss - stocks can go up indefinitely
2. Use multiple brokerage accounts - some brokers don't hold all the stocks to short
3. Not shorting "Lottery Ticket" i.e. biotech
4. Market is designed to go up in the long run
5. Stocks drop faster than they climb
There is a lot to cover in Shorting stocks so we will revisit this topic with a more in depth article in the education section soon.
If you have any questions relating to this market update or wish for us to talk about a trading subject that you're interested in, please don't hesitate to contact us.
believes these are two different types of people!) They also want to know where you would like to invest if it was your choice for example the emerging markets - China - India - Brazil etc or would you be more comfortable investing where you know for e.g. Country of birth. It then takes all of this personal and financial information into consideration and gives you an investment score usually of between 1-5 with 1 being risk averse and 5 being risk adverse.
The problem I have with this whole investment strategy is that you are being interviewed by a person you hardly know so how do they know what my investing preferences are beyond a generalisation and can software really work out if we can tolerate financial risk? The investing sirens going off in my head tells me that a spotty kid that takes some details is about to pass my computer score on to a guy I don't even know to start investing my hard earned money in the stock market...no thanks!.
I think as aspiring traders you should be asking yourself the types of questions that banks ask when you have those financial planning meeting they pull you in for! Finding out some home truths about your true personal investment profile could help you with your personal investment portfolio. Be truthful as there is no one to impress when you ask yourself financial questions!