Sunday, March 29, 2009

Market Lesson – Risk

Investing in the stock market is a risky business, investors must be patient and disciplined. There are no guarantees that you can make money in the stock market. Just as fast as you can make money you can also lose money. Investors are human beings so we all have strengths and weaknesses. Most investors invest in stocks but overlook the amount of risk they are able to take if the market turns in the wrong direction.

There are two types of investors. There are aggressive investors and conservative investors. Aggressive investors look for huge returns in short periods of time, so they usually take on more risk. Conservative investors look for longer term investments in order to make huge gains in longer periods. Therefore conservative investors take on less risk. What type of investor are you, aggressive or conservative?

The younger you are the more risk you are able to take. The older you are the least amount of risk you are able to withstand. The longer term approach is the best approach to use being that it provides investors with more options. Stocks should not be short term investments.

Investors make more money when they invest over long time periods. The top one percent of all traders follow investment rules. The reward of risk is value, so investors must know their entry, exit, price target and how much money they are willing to risk before making a trade. A strict set of rules will help make huge gains as well as give investors a peace of mind. Follow the rules of trading not tips from friends, rumors or speculation. Following the herd will surely lead you to mediocrity.

By: Marlin Rolle

No comments: