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Setting Specific Investing Goals

Apr 15, 2008
Successful investment cannot be achieved without setting specific goals. It is the primary aspect of investing. Why do you want to invest? This is the question that every investor should ask himself. Is it to have financial abundance, to educate your children, to retire with financial stability, to get married, to take the dream vacation, to start a new business, or is investing on the stock market a passion! Define your goals well and vividly. See the end result as a reality. Setting your goals will set your life in a positive and abundant life style.

Then, ask yourself how much money you can risk to lose! This question and its answer is more of an emotional nature than physical. Investing in the stock market has tremendous risks involved. With the magnitude of the risks comes the abundant money supply! The gains can be substantial, and so does the losses. Even with careful planning and thorough technical knowledge and its implementation, the stock market can produce fearful and sudden falls due to many unforeseen impacts and aspects.

Learn and know your tolerance levels for risk taking. A sudden change in the interest rates, natural or manmade disaster, and loss of dollar value globally can affect the US stock market adversely. A company can become bankrupt and it can affect other associated companies in the same or different industries. A war-like situation, a weak government, public sentiment, even global warming can affect the stock market and send it downwards. A recession or slowdown will also affect the stock market's performance. There are plenty of reasons that can affect the stock market and can cause emotional and financial hardships.

Systemic and unsystemic risks can affect either the entire market or part of the stock market. So, the risks, especially the systemic risks cannot be entirely eliminated, where as the unsystemic risks can be partly or completely avoided.

To eliminate the risks partly or fully, the best course of action in the stock market is to diversify your investment. This can still keep your chances of succeeding high even if one or some of your investment turns sour. There will be other securities that can show positive results even if some of your other securities fail. It is important, therefore, to invest in diverse sectors and classes.

Plan your strategy well. Develop your plan thoroughly and recheck all the factors. You'll need to readjust your plans and strategies according to situations.
Remember, the stock market has no place for emotional investment! Don't be too greedy or too fearful and always check every aspect before buying, holding, or selling your stocks. You will need to take more risks depending upon how the market is behaving. Keep learning the techniques and fine-tune your every strategy. A perfect timing is an asset. Develop your skills continuously. Monitor your portfolio constantly. Your portfolio is your wealth on paper, so don't be afraid to convert it into real cash according to the situation.

Warren Buffet has a golden rule for making money on the stock market, in fact, two golden rules, and they are:

Rule number 1: "Never lose money", and the second rule is "Never forget rule number 1". Do everything possible to follow his wise advice and you'll succeed!
About the Author
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