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Beginners?
What does a reasonably intelligent individual
need to invest profitably in today's stock market?
Where to begin? A beginner may be someone caught
up in the toils of life, too busy earning a living
to make any money, unable to find a little risk-capital
to invest. Time is the culprit, too little to
do so much - to learn the language of the market,
to understand market forces that cause prices
to change.
Beginners may also be someone told that "buy
& hold" is the only way to invest, but
who is dissatisfied with the 5 to 15% return each
year and who wants to diversify a little on their
own.
Other beginners include seasoned veterans who
recognize the changes that have taken place in
the market with the baby-boomer investors and
the increased influence of the internet. And the
classic beginner is the student, serious about
what the future offers and how to increase the
likelihood of a reasonable piece of the pie.
As potential investors, we are faced with monumental
questions: what should we invest in, how much,
when and guided by what strategies. As with any
effort, knowledge is the key to success. Understanding
the risks as we learn how to invest becomes paramount
in our quest for a profitable experience. In this
manner, we can find the strategy that will let
us sleep "when the wind blows."
There are many educational resources for this
purpose, helping the novice and/or seasoned investor
focus on what is meaningful. Above-average returns
with minimized risk can follow diligent training
if we stay clear of high-risk ideas and juicy
promises. Rather, find and learn the tools necessary
to wheel around the investor's work-place, understanding
relevant issues. Don't look for quick schemes
to open the money windows in the sky. Understand
how the market works, the inherent risks and those
self-imposed, that can be minimized by careful
and decisive action on our part.
Your own reasonable intelligence is sufficient
to understand these principles. Understanding,
you can make profitable choices on your own. Many
different investing/trading strategies are available
to meet these objectives. While there are success-stories
in every strategy, the consistent theme with all
successes lie in the discipline traders devote
to their own version of the game. That means it
is important for each investor to find the one
strategy that fits their own personality. It is
a rare case for anyone to become truly successful
by riding in on someone else's coat tails.
Market success comes not from finding the silver
bullet, the perfect system, the Holy Grail of
investing. Rather, we each bring our own risk
tolerance, expectations, intuition, training and
a host of other issues to the table. All these,
taken together, make us each very unique and different.
What works for one will not work for all. As we
struggle to find the system that works best for
us, we need to experience different alternatives.
That is, gain experience in the good, the bad,
and the ugly of as many choices as possible. In
this quest for understanding, several strategies,
trading styles, and investment methodologies must
be considered. This way the prospective investor
can get a glimpse of their role in formulating
a success-strategy that belongs to them. The difference
between success and failure in the market is razor
thin. That balance is tipped predominantly to
those who learn as much about themselves as the
market.
Whatever approach we take for our beginning education,
a simple procedure call "Paper Trading"
should be used liberally. This can provide a vicarious
experience in the strategy being studied, without
the expense and potential loss with real money.
Since success lies not in making perfect decisions
every time, paper trading can help us learn to
make more good choices than bad. When we do take
the leap and invest real money, we will have had
some experience in the challenge and excitement
the market can offer.
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