There are 3 Kinds of People in the World ( & in the Stock Market)

By Ronald Colunga

There are three kinds of people in this world that we live in. There is that unique group of people classified as “Wills.” Then, we have the “Wont’s.” Last but not least we have the “Cant’s”. We all at least know one person in each of these categories. Let’s determine which one are you, shall we?

Wills

First, let’s talk about the wills. This certain group of people are the ones with the positive energy. They always believe they “Will” do whatever they put their mind to. There is nothing that can stop them, nothing that they can’t handle. These are the people that help others, they use their positive energy to influence others to apply that “Will” lifestyle to their lives as well. Wills strive to achieve their goals, they strive to help other achieve theirs. Not only do they have the mindset to help them achieve greatness, but they have the mindset to help others achieve greatness, which makes them wonderful people. Always giving off a good vibe and good energy, making you want to be around them. Ask the wills for advice, they will (no pun intended) guide you in the right path. “The wills accomplish everything.”

Wont’s

The wont’s are also known as the “Opposers” or the “Haters” this day and age if you like to be retro, so to speak. The wont’s are of course, the ones that say won’t to every single question. I guess you can also say the wont’s are somewhat of the jealous types, they don’t want anyone to do better than them. They shut everyone down with the won’t speech and discourage an individual. With their won’t mentality they also hurt themselves, wont’s begin to answer their own questions with their same answer and speech and begin to discourage themselves. “The wont’s oppose everything.”

Cant’s

Here we go with the cant’s, this is a group of individuals that accomplish nothing. These are the people that tell everyone they can’t do anything. These are the ones that don’t get enough from their failures that they have to bring other people down with them. The negative energy with the cant’s is incredible. DO NOT let their negative energy bring you down. Instead use that energy to make you into a “Will” use their can’t mindset to give you inspiration and motivation on your path. “The cant’s fail in everything.

Source: http://amsdaily.net/

Three Types of People produce Three Types of Traders

If you are of the first kind, “the wills”, you will overcome all the obstacles on your way to consistent success. You will accept, even embrace, uncertainty as the driving force behind the next big opportunity for gain. You will lose gracefully and move on to the next trade, knowing that trading is a game of probabilities and possibilities; not certainties and absolutes. You will leave money on the table, thankful for what you were able to gain; not bitter by what was left. If you are of the first kind you will succeed. You will indeed. 

If you are of the second kind, “the won'ts”, you will look for the always elusive easy road to riches. You won't believe in the effort required to become a disciplined trader, driven by solid habits repeated daily. You won't apply the skill necessary for managing risk as that would require planning and preparation, something you just do not have time for. You won’t develop your own well defined trading edge, depending instead upon others to do it for you. If you are of the second kind your opposition to anything other than what is easy will make it quite difficult to succeed when times get tough, and they will but you won't.

If you are of the third kind, “the cant's”, you will blame everyone and everything for your failures. You can't succeed because you are too busy finding fault in any trading strategy that produces a loss. You can’t succeed because anyone who does so has some special knowledge or gift that you obviously cannot possess. You can't succeed because the market is rigged. If you are of the third kind…quit. You are a quitter with a quitter's attitude. Be in the majority. Be a can’t. It's easy.

So, what kind of person (trader) are you?

www.thecrosshairstrader.com

Quote for the day

"Effort and courage are not enough without purpose and direction." - John F. Kennedy

Rebalancing your investment portfolio

By Atchuthan Srirangan 

In every market scenario, a few investors become rich and others become poor. The rich and the poor are due to those who believe and do not believe in rebalancing.

Investment is always half-hearted unless rebalancing is done. Booking profits and converting notional profits into real profits is an art and science activity. Controlling, one’s greed and fear while rebalancing is very strange and complicated human behaviour which is hard to be adopted by an investor.

It has been found that often investors criticise the concept called long-term investments particularly when the market goes for a tailspin. Well for all those who burnt their fingers, for them asset allocation and rebalancing are unknown words. Only equity and debt, but low and sell high are not investment concepts.

Investment is always for a long-term ride provided you know the concept of rebalancing just like changing gears of a car. As you change the gear of the car at various points while travelling a long drive, one also has to use rebalancing as gear to change the asset allocation. Every road is not a highway, similarly every investment cannot just climb high and high.

Often, we find that there is the confusion that which investment to be sold and which one to be kept under hold. Well, asset allocation helps to resolve this gap. The behavioural finance aspect of rebalancing itself is as difficult as doing new investments. We have witnessed that rebalancing has been taken as a blind tool where an investor sells his good apples and keeps his bad apples in the expectation that the price will go up. This behavioural aspect cannot be ruled in this case.

Rebalancing is not about selling the good apples and holding bad ones. It is about asset reallocation. Rebalancing introduces one to asset allocation concepts and how a long-term wealth portfolio is created through asset allocation.

Rebalancing is not a high-frequency activity. It is an act that is initiated when one asset class performance is more than the desired objective.

One of the first steps you need to take in investing is to determine the asset allocation appropriate for your particular financial goals. For example, let’s say you’re shooting for a well-funded retirement that’s set to start in 35 years. Given that long timeframe and your personal comfort level with volatility, you decide to take an aggressive investing approach and go with an asset allocation of 90% stocks and 10% fixed income for your retirement portfolio.

But because the market can move around so much each day, that allocation is bound to change over time, if left alone. So, to maintain the status quo (or breakdown) of your portfolio, you need to act. And that action is what we call rebalancing.

For rebalancing, there are two main approaches to this task. The first approach, and the one that we will focus on here, is the time-based approach, where you rebalance on a set schedule. The other approach is called the rebalancing band approach, which does not rebalance until an asset class moves outside of pre-specified bands. In other words, it lets the portfolio run until it drifts too far out of line, and then it brings that portion of the portfolio back into line.


Rebalancing

• Ones which do not fit in the long-term goal of investments and destroys other income assets those investments need a rebalancing
• Taking decision of rebalancing get restricted to maintain the status quo and not acting upon to take proper action from inaction
• Market times and market sentiments kill
• Know the assets before investing
• Invest in knowledge and then assets
• Financial planning and advisory keep avoiding these deaths traps which lead to loss of capital and create fear and lack of confidence for long-term investing
• Good investment opportunities are lost due to a lack of confidence; seek financial planning and you will be able to save from loss of confidence
• Financial advisors protect one’s portfolio through his education on financial advisory and experience
• Hiring a well-educated financial planner is another important task
• Don’t throw good money after bad money, since money lost is money gone
• Not taking a rebalancing decision is a decision that has its consequences; similarly, only savings in safer assets have their own risk hence invest with proper asset allocation based on your risk profile

In this pandemic time, the global economic debt has swelled significantly and hence the equity market will have an extensive high volatile ride. Further, in many places, its being found that the current equity market rally is based on few stocks, hence the broader market participation is less, hence those who are not aware of rebalancing will need more of the same. Asset allocation and rebalancing is the only tool for the coming decade to manage your investment portfolio.

[The writer is Assistant Manager – Research for Investments (Fixed Income & Equity) and a visiting lecturer.]

www.ft.lk

Quote for the day

"Even if you're on the right track, you'll get run over if you just sit there." - Will Rogers

9 Must-have Skills to Invest like a Pro

When people think of investments, they usually associate the word with investment banking or the stock market. In this information age, there are boundless vehicles for building long-term wealth, like real-estate, information marketing, venture capitalism, business ownership, franchise, and network marketing, to name a few.

With pensions on the decline, and with governments less and less able to support their aging population, a comfortable retirement is increasingly becoming an individual’s personal responsibility. It’s now time, more important than ever, for us to sharpen our investment skills to secure our own financial future and security. While we’re at it, why not go for gold and secure our financial freedom too?

Here are 9 must-have skills to invest like a pro.

1. Delay Your Gratification

A study gave children two marshmallows. The young participants were promised two more if they waited 15 minutes and didn’t eat the marshmallows. The ones who delayed their gratification were much more likely to succeed in life than the children who caved to instant gratification. Pro investors don’t eat the marshmallow. They practice patience and invest up front to reap long-term rewards.

2. Distinguish Myth from Truth

Pro investors don’t believe everything they hear in the News. They base their decisions on advice from mentors who they know have walked their talk. They base their real-estate decisions on economic fundamentals, their online business decisions on client feedback, and their stock investments on trends – not spikes. They don’t panic about looming bubbles, bursts, or crashes.

3. Become Financial Literate

Financial literacy is not a talent reserved exclusively for math geniuses. As Robert Kiyosaki, author of Rich Dad, Poor Dad, teaches: financial literacy is educating yourself on the relationship between income (what comes in), expenses (what goes out), assets (what you own), and liabilities (what you owe). Pro investors work on their business, not in their business. Pro investors also own assets that work for them, rather than them working for money.

4. Leverage Your Time

Pro investors work smart, not hard. They leverage time by investing early and for the long-term. They leverage other people by hiring them for their time and expertise. They leverage money by using other people’s money to create more money (via mortgages, venture capital, etc.). Delegating tasks is essential to maximizing profits, a la Tim Ferriss – a pro investor who works The 4 Hour Work Week.

5. Discipline Yourself

In this age of social media, there are shiny distractions everywhere. To succeed in building long-term wealth, pro investors practice daily self-discipline. They “wax on” and “wax off” consistently and persistently on their daily, weekly, monthly and annual goals. They don’t get side-tracked by people who are not on track. They prepare their day the night before. They also conquer one big important task, first thing in the morning before they ever open their inbox.

6. Master Your Emotions

I.Q. (intelligence quotient) has taken a backstage to E.Q. (emotional quotient), says Daniel Goleman. E.Q. is a measure of emotional intelligence: the ability to stay calm under stress, think creatively under pressure, and recover quickly under failure. Pro investors don’t have knee-jerk reactions to external circumstances. They pause, quickly weigh their options, and respond in a way that creates the outcome they want.

7. Just Decide

From the pages of Think and Grow Rich, the premier guide to wealth and business success, pro investors are decisive. They trust their intuition, decide promptly, and course-correct along the way. They don’t fall into the Black Hole of analysis paralysis. Most people follow the ready, aim, fire motto. Pro investors follow the ready, fire, re-aim motto.

8. Persist

Pro investors plan their work and work their plan – even when they don’t feel like it. Once they’ve chosen their investment vehicle, they go deep, not wide. They become experts in their business or investment vehicle. They maintain enthusiasm between highs and lows, wins and failures. They learn and feed those lessons back into their next action step.

9. Lead Yourself, Lead the Team

Pro investors know who they are, leverage their strengths, outsource their weaknesses, and know why they invest. They have a massive vision for their impact in the world, in their community, and in their families. They seek to create meaning through their investment vehicles. They serve others. True leaders don’t just create followers, they create other leaders.

Are you operating like a professional investor?

How many of these skills do you currently have? How many of these skills do you want to master? Let’s face it, everyone is busy now-a-days. When you ask them what they’re busy with, they don’t always know. Don’t fall prey to busy-ness! Choose a skill that you’d like to sharpen. Every day, take one small step in that direction.

Remember, we all crawl before we walk.

Source: https://www.lifehack.org/

Quote for the day

"If you want to succeed you must never stop learning, never stop trying and just keep being yourself. You are your own person. You make the choices in life that affect you." - Ruby Rose

Stages of a Trader

Most new traders never make it through the learning curve and traders that are successful early on at making money only discover that they were lucky and did not have the skill they thought they did. Traders go through many stages in their development and they can’t skip a step, they must learn the lessons from the markets and discover their own weaknesses.

On the journey from new trader to successful trader there are many steps, here are the main ones that everyone goes through.

Stage 1: A new trader knows nothing.

A new trader has zero knowledge about how the markets work or how traders even make money. In the beginning stage most new people think profitable traders can predict future price action and make money by always being right about every trade. A novice believes that traders make consistent returns daily and weekly and there is a Holy Grail of trading that makes money in every market. They believe traders create for themselves regular paychecks with few losses and no drawdowns in capital.

At this stage a new trader knows nothing and is ignorant of their own ignorance.

Stage 2: A new trader pays to learn.

There are two directions to go in at Stage 2. A serious new trader will begin to educate their self through reading books, studying charts, taking eCourses, and learning system development and backtesting. There are also endless free sources online to learn the basics of trading from. They are on the right path.

The other direction that many new traders choose is to jump right into trading with real money. Every trader will pay for their education in time, study, experience, and trading losses. It is better to learn as much as you can about trading before putting real money at risk. A book on risk management is less expensive than trading with too large a position size. It is ignorant, arrogant, or both to think you can start trading with no plan or system and that you will beat other traders consistently.

You will pay to learn how to be a trader and you get to choose how expensive you want the lessons to be.

Stage 3: The reality check stage.

At this stage the new trader has studied enough to know the right questions to ask, or they blew up their first account and are now ready to study trading seriously. After a new trader realizes that trading is not the easy money they thought it would be, this is the crossroads of quitting or doing the work.

If a trader has put real money at risk or studied system win rates and drawdowns they begin to realize that trading is a professional endeavor of risks and rewards not a place to go grab some easy money.

When the reality of trading sets in the trader will choose to do the work needed to become successful or go looking for easy money somewhere else.

Stage 4: The information overload stage.

At this stage a trader gets all the information they need to start trading but they know so much that it begins to become conflicting information.

A momentum trader says to buy the breakout while a swing trader says to sell short into resistance. A day trader says overnight risk is too dangerous and a trend trader says holding overnight and for days and weeks is where the big profits are. Some systems rely on high winning percentages and other systems focus on a few big wins and manage several small losses.

Once a new trader understands price action trading, reactive technical analysis, and risk/reward ratios they need to start choosing what is the right trading method for them. What time frame will they trade? What is their target win rate and risk/reward ratio? What will be their edge?

When a new trader has all the information they need the next step is filtering out the right information that applies to them.

Stage 5: Developing your own trading edge.

In this stage a new trader decides to become a real trader. The trader filters through all their knowledge and chooses what they will implement to start creating their own trading system.

Many times a trader will try to create the perfect system looking for the Holy Grail strategy that never loses. This can be a trap a traders spends a lot of time and energy in until they realize it doesn’t exist, then they can stop looking for a perfect trading system and just develop a profitable trading system.

The trader chooses a trading method that fits their own screen time, risk tolerance, return goals, personality, and belief system. They choose the markets they will trade whether stocks, forex, options, futures, or crypto. They have filters for building their watch list. The trader has completed large backtests and historical chart studies to find an edge in price patterns. They now have signals that have a profit factor over large sample sizes of data.

The trader has an edge over other traders as they know what types of trade setups typically work out to be profitable over time if they cut losses short and let winners run.

Stage 6: Finally some profitable trading.

The profitable trader has created a trading system with a positive expectancy over time. He trades it with discipline and consistency. The trader doesn’t get emotionally moved with losses and drawdowns as they are just part of any winning system not a reflection of a bad process or that something is wrong.

A good trade becomes one that was executed within the system with discipline and a bad trade is one that didn’t follow the trading plan. The trader becomes a servant of the price action and just trades their own signals. They go in the path of least resistance and manage trades to be small wins, small losses, break even, or big wins. Big losses have been removed from possible outcomes. Money becomes a side effect of good trading.

At this stage the trader has faith in their system and their ability to execute it. He will stay within risk management guidelines for stop losses and position sizing so every trade is just one of the next one hundred trades and shouldn’t have any large emotional impact or hurt the trader’s ego.

In the final stage the trader is a manager running their trading system like a business and letting their edge play out over the long run.

Source:https://www.newtraderu.com/