Listen to the full episode on iTunes (and please leave a rating to help the podcast reach more people): E20: How to be an Investor
- The most competitive and lucrative fields today are finance and network based online business.
- In financial decision making, psychology is more important than maths because you’re your own worst enemy.
- As soon as you start putting numbers into an excel sheet you start believing those numbers.
- In other words, you may fool yourself instead of having a competitor fool you.
- Also, people trade the most when they’re emotional.
- When you’re emotional, you’re by default also less rational.
- Making trades while being emotional leads to losses over time.
- Finding the right strategy: Find a financial strategy that suits your personality.
- Once you have a good strategy you start using it to see what parts of the strategy work best.
- Then you put more money into the parts that work.
- After you’ve refined the strategy you keep using it so you can evaluate whether it worked (and if you made or lost money because of factors that weren’t considered in your strategy).
- For example: Let’s assume your strategy leads you to invest in Ford stocks because it predicts a 20% increase in Ford stock prices as a result of higher profits. Later you find out that the Ford stocks did increase 20% in price because of a higher valuation. In this case, you made a good decision to buy the stock, but it was not because of your strategy.
- Cases like the one above shows why you must keep a trade journal so you can keep improving your strategy and thereby minimise losses over time.
- When your strategy is working you should scale up your investments.
- When your strategy isn’t working you should scale down.
- Get timing right: It’s easy to make money in a bull market. Otherwise not.
- Never go all in. Sooner or later you will lose it all because there are market conditions we can’t control.
- When practicing as a beginner: Use real money rather than Demo accounts.
- Where to find financial knowledge: Deep books and articles.
- Where to not find financial knowledge: Twitter and forums.
- You need to read deep information and practice over a long time to develop pattern recognition before you can know what stuff on twitter and forums is good and what is garbage.
We are right now creating the Future Skills Program which will be an online video course covering decision-making, career, and risk-management, with weekly homework and evaluations.
* Better decisions > better finances > better relationships > and a better life.
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