This is the third part of ‘The holy grail of investing’. You may find parts one and two here:
- The holy grail of investing part 1
- The holy grail of investing part 2
So you have…
- Decided on what you really want in life
- Calculated how much you need to achieve your financial goals
The next step to chosing the financial instrument that best suits you is:
“To know yourself”
What kind of person are you?
How do you perform under stress?
How much time can you give to investing?
Are you a social person? Or do you prefer to sit behind a computer (or phone) screen?
Do you have a tendency to ‘follow the crowd’ and/or ‘blindly follow suggestions’?
Well… If you have this last one, I’d suggest you start gradually distancing yourself from it. Making a principle and putting it into words might be one way of going about it.
“I will only invest in that which I understand. I will study the instrument, make a plan, and execute the plan. I will never blindly follow others’ suggestions”
This is how I go about it at least. I can’t think of any situation where blindly following other peoples trading or investing suggestions is a good idea. Oh… unless you are the ones giving out the suggestions and charging a fee for it.
Not that this is a bad way of making a living. On the contrary, sharing knowledge and information is an honorable way of building wealth. This is one of the core aims of netflyp.com.
What is bad is blindly following the other guy who likely knows what they are doing.
The third part of knowing what you are doing is to know who you are.
If you don’t do so well under stress, then maybe daytrading isn’t very suitable for you.
If you flourish in stressful situations but the after hour news just makes you go nuts, then maybe daytrading is the way for you.
Are you someone who is willing to sacrifice some time with the family – for those with family? If you are investing or trading as a part time or a second or third job, then it might take away some portion of your time.
I don’t know how many traders are living the ‘dream’ millionaire go – holidaying every other day life-style. Maybe there are people who have achieved the level of wealth to be able to do this. But doing it while building wealth through short term trading – I don’t see how it is possible.
Trading, especially short term trading is essentially just another job. In all likelihood, it may be an even more taxing and time as well as emotionally consuming job compared to your regular job (but that will partly depend on what your job is I guess).
If you are planning to invest in property, a certain level of social skill might be required. If you are planning to be a real estate negotiator or agent then it is even more important. I am acutely aware of this because I am not a people person.
I am invested in real estate as an owner of vacant land and I know first hand that even this requires some level of social engagement, building and maintaining connections.
I know from numerous second hand experiences and as a tenant that being a rental property investor requires much more social skills and engagement, as well as various other skills. This is one reason that has kept me from going into rental property. I know myself. Dealing with difficult tenants, maintaining a property and meeting potential new tenants isn’t something that I can manage to do and neither is it something that I particularly enjoy doing.
So while there are many investment/trading choices, and many of them may be accessible, not all of them may be suitable for the type of person that you are. Many investment options are not suitable for me because of my personality, and my personal preferences with regards to risk, even though they are just a finger click away from being accessible.
At the end of the day, it is you the person who will be doing the trading and/or investing. So what kind of person are you?