What Type Of Investor Should You Be?
It can sound intimidating at first, but entering into the business world of investing is quite a bit easier than it used to be. The field of investing is no longer open only to those who are already wealthy or financial institutions. Every day people like you, me, your neighbor, and your hairdresser are giving investing a try.
An important aspect to consider before making the leap into investing is what kind of investor you want to be. Investing is very exciting and can be potentially rewarding. Success doesn’t just happen by chance. There are many out there who entered into investing without making the decision of what kind of investor they wanted to be and who just took a small sampling of everything out there. Those kinds of investors are not the kind who stick around and make something out of it. Take some time and give it some serious thought and consideration. Need a jumping point? Read on.
Types of investors
The buy and holders of the community put their money into shares that they feel are good value and hold them for expanses of anywhere between 1 and 50 years. This investment style is most suited to people who are long term orientated by nature, not looking for a quick profit and have an eye for good companies. The most famous proponent of such an approach is the world’s second richest man, Warren Buffet, so you could say that it isn’t such a bad style.
Day trading is the complete opposite of the buy and hold approach and involves individuals who buy and sell shares in a very short period generally within the same day. If you have a lot of time and are prepared to watch market movements very closely then this approach may be for you.
The next thing you need to look at is what sort of analysis you want to conduct on the shares that you are considering. Generally there are two schools of thought, one being fundamental and the other technical. You will always find people pushing one or the other but it makes more sense to incorporate a blend both.
Fundamentalists tend to look at company profits, management direction, future plans/growth prospects, the economy as a whole and such like company and economic factors.
While those with a mathematical or scientific background might look at share price charts employing various technical analysis techniques, ratios, indicators and trends in order to identify which shares they want to look at further.
You should realize that relying wholly on one or the other is not the wisest thing to do. For example a chart that has all the indications that a share is going to be a good choice for the future is useless if the company is going to file for bankruptcy. As I mentioned earlier a blend of the two should be considered.
When you are deciding what type of investor you want to be, one of the most important considerations is your risk threshold. In other words how much you are willing to loose. This again will have an impact on the investment style that you choose and will also have a relationship to the level of returns that you may be seeking.
Investors come in many forms and there is no right or wrong way. Different things work for different people. It is vital that you decide which method best suits you and that you stick to this method.