Investor Psychology
by T Madell, 22-Nov-2004
http://funds-newsletter.com
I have written many times about nothing that most market financiers largely ignore: The role of the investor's own characteristics in determining how well he/she does as an investor. Perhaps this statement seems a little abstract and therefore it is easy to disregard it especially coming from someone such as myself whom most readers most likely have yet to hear of. But when you realize that similar statements have come from 3 of the world's most successful security market financiers, Peter Lynch, Warren Buffet, and John Templeton, perhaps folk may want to pay a bit more attention.
Peter Lynch, in his book "One Upwards on Wall Street", discusses the characteristics of successful trading insiders. As most stockmarket investors are aware, Lynch served for 13 years as manager of America's top ranked mutual fund at the time, Fidelity Magellan. An investment of $10,000 in the fund in 1977 may have grown massively to $280,000 by 1990. In this book, Lynch states: "Ultimately it is not the Economic Marketplace nor even the corporations themselves that determine an investor's fate. " And: "It is personal preparation, as much as knowledge and research, that distinguishes the successful share picker from the chronic loser."
Lynch further states: "The key to making moulah in issues is not getting scared beyond of them . ;" he continues: "in dieting, as in equities, it is the gut and not the head that determines the results. "
Lynch advises United States to try to examine our own behavior and attitudes before we enter into instrument trading. Answer these questions: Are you trading for the short-term or the long-term ? How can you respond to a sudden and unexpected severe drop in figures of ones shares? (We should all know much better where we each stand on this now that it has been happening, though not so suddenly, for a long time.
The above statements, though written by Lynch for those who speculate in individual equities, are nevertheless just as valid for mutual funds speculating insiders.
What additional qualities did Lynch suggest make for a good investor? Lynch lists the following: patience, self-
reliance, common sense, a tolerance for pain, open-mindedness, detachment, persistence, humility, flexibility, a willingness to do independent research, a willingness to admit mistakes, the ability to ignore general panic, and
the ability to make decisions without complete or perfect information.
Some final words from Lynch are perhaps relevant: ". . it's crucial to be able to resist ones human nature and our 'gut feelings. "
Warren Buffett, perhaps the world's most hallowed investor, learned that the successful investor is often the individual who has achieved a certain temperament. His teacher, Benjamin Graham, taught him that the investor's
worst enemy was not the stockmarket, but oneself. Thus, regardless of superior skills in mathematics, finance, or enterprize acumen, if you can't number 1 master ones own emotions, you are not well-suited to best earnings from our nvestments.
John Templeton, a masterful international investor, believed that adopting a flexible, open-minded point of view to fit different times, countries, and investment climates, was the investor's greatest desire. He stated that the best value might be found in shares that are completely neglected and that different market financiers may not even be aware of.
Templeton admits he makes constant mistakes, but because he is heavily diversified, the damage is limited. He advises not to trust rules and formulas. The world of speculating is always changing leaving the investor who sticks to time-
honored truisms sadly way behind. Everything has its season, as the classic Byrds song "Turn! Turn! Turn!" reminds United States. Since the world is constantly changing, the successful investor too must change when required.
For more information on whether you've the characteristics needed to be successful as an investor, observe the net site shown above.
----------------------------------------------------------------------------------
This article is courtesy of http://www.traders101.com.
http://funds-newsletter.com
I have written many times about nothing that most market financiers largely ignore: The role of the investor's own characteristics in determining how well he/she does as an investor. Perhaps this statement seems a little abstract and therefore it is easy to disregard it especially coming from someone such as myself whom most readers most likely have yet to hear of. But when you realize that similar statements have come from 3 of the world's most successful security market financiers, Peter Lynch, Warren Buffet, and John Templeton, perhaps folk may want to pay a bit more attention.
Peter Lynch, in his book "One Upwards on Wall Street", discusses the characteristics of successful trading insiders. As most stockmarket investors are aware, Lynch served for 13 years as manager of America's top ranked mutual fund at the time, Fidelity Magellan. An investment of $10,000 in the fund in 1977 may have grown massively to $280,000 by 1990. In this book, Lynch states: "Ultimately it is not the Economic Marketplace nor even the corporations themselves that determine an investor's fate. " And: "It is personal preparation, as much as knowledge and research, that distinguishes the successful share picker from the chronic loser."
Lynch further states: "The key to making moulah in issues is not getting scared beyond of them . ;" he continues: "in dieting, as in equities, it is the gut and not the head that determines the results. "
Lynch advises United States to try to examine our own behavior and attitudes before we enter into instrument trading. Answer these questions: Are you trading for the short-term or the long-term ? How can you respond to a sudden and unexpected severe drop in figures of ones shares? (We should all know much better where we each stand on this now that it has been happening, though not so suddenly, for a long time.
The above statements, though written by Lynch for those who speculate in individual equities, are nevertheless just as valid for mutual funds speculating insiders.
What additional qualities did Lynch suggest make for a good investor? Lynch lists the following: patience, self-
reliance, common sense, a tolerance for pain, open-mindedness, detachment, persistence, humility, flexibility, a willingness to do independent research, a willingness to admit mistakes, the ability to ignore general panic, and
the ability to make decisions without complete or perfect information.
Some final words from Lynch are perhaps relevant: ". . it's crucial to be able to resist ones human nature and our 'gut feelings. "
Warren Buffett, perhaps the world's most hallowed investor, learned that the successful investor is often the individual who has achieved a certain temperament. His teacher, Benjamin Graham, taught him that the investor's
worst enemy was not the stockmarket, but oneself. Thus, regardless of superior skills in mathematics, finance, or enterprize acumen, if you can't number 1 master ones own emotions, you are not well-suited to best earnings from our nvestments.
John Templeton, a masterful international investor, believed that adopting a flexible, open-minded point of view to fit different times, countries, and investment climates, was the investor's greatest desire. He stated that the best value might be found in shares that are completely neglected and that different market financiers may not even be aware of.
Templeton admits he makes constant mistakes, but because he is heavily diversified, the damage is limited. He advises not to trust rules and formulas. The world of speculating is always changing leaving the investor who sticks to time-
honored truisms sadly way behind. Everything has its season, as the classic Byrds song "Turn! Turn! Turn!" reminds United States. Since the world is constantly changing, the successful investor too must change when required.
For more information on whether you've the characteristics needed to be successful as an investor, observe the net site shown above.
----------------------------------------------------------------------------------
This article is courtesy of http://www.traders101.com.
posted by Simply Options Trader at 12:08 AM
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