Home » Finance » Stock Market

Using a Decision-Making Horizon to create Share investment return

Jul 26, 2008
A close friend and master investor recently explained this disarmingly simple, yet immensely powerful concept to me. I thought it may be of value to you that is if you're looking for that extra 20, 50 or even 100% return on your share (and other) investments.

Imagine (excuse the pun) you make a stock investment and as soon as the trade is concluded, you lapse into a coma. You wake up days, weeks, months or years later. How will you know if you wake up happy with your investment?

The answer is obvious the lessons are not.

If your return is more than you expected, you're happy. If not, you?re disappointed or depressed.

So what are the lessons?

Lesson #1 You usually don't fall into a coma after making a trade. Instead, you track every single daily (hourly) up and down movement and rarely, if ever, play the trade/investment through to your original decision-making horizon the period over which you originally invested.

Many investors invest with a let's see what happens approach that has them constantly second-guessing themselves, creating immense levels of stress and sub-optimising their returns. If the stock goes up, they might sell prematurely, if it goes down, they might sell at a loss in fear of a further drop.

You need to approach your investments knowing ahead of time your particular decision-making horizon for each one, so that you can appropriately mix and match investment size and risk/return with the decision-making horizon in mind thus maximizing returns and minimsing stress and lost opportunity (costs).

Lesson #2 The second lesson is selecting the right investment for the right decision-making horizon. Some investors day trade stocks whereas others have a buy and hold strategy both benefit from knowing how long their horizon is. The worst thing you can do is buy, hold and lose sight of time. Returns are time dependent. A 100% return sounds great, but if it took 10 or more years, in today's terms, that is a very poor return on capital.

So, how do you select the right stocks with a decision-making horizon in mind You must match the projections of growth with YOUR horizon. If a company has a 3-year plan that is attractive, but your decision making horizon is 1 year, that's a sub-optimal match just .

Lesson #3 Make the trend your friend and match it to your horizon as much as you can. If a company has an aggressive growth strategy within a bigger trend (e.g. commodities) that you believe they can deliver on and your horizon and their projections match up, it's definitely something you want to consider and put on your short list.

Lesson #4 When you're in a coma, you can't keep researching and over-analysing every option available. When you are awake you can but that doesn't mean you should. Of course there's a fine line involved and interpretations of this lesson will vary between investors, but Warren Buffett is notorious for sticking to his horizons even when everyone's telling him he's wrong. His bank account is proof that he knows something few people ever learn!

Lesson #5 Last and most importantly you can use this secret to unlock unlimited opportunities in other investments you make be they in real estate, projects, personal or entrepreneurial ventures. Once you know how long you're in for, you can make the necessary time, effort and resource commitment to ensure a stellar return or outcome.

When you match them up, it's like all the stars in the universe lining up and magic starts to happen. When you don't it's as if everything is conspiring against you producing disappointing or disastrous results.

Summary: The most simple secrets are often the most powerful and valuable, like this one every single successful master investor alludes to this concept and I can guarantee you it'll improve your results. How much As much as you abide by its principles!
About the Author
Les Freeman is an expert trader with years experience in stock trading. His ability to find right trading opportunity has helped people to make huge amounts of profits. Read more at Online Home Trading & Day Trading
Please Rate:
(Average: Not rated)
Views: 151
Print Email Report Share
Article Categories
    • Artists
    • Gambling
    • Humanities
    • Humor
    • Movies
    • Music
    • Photography
    • Tattoos
    • Television
    • Classic Cars
    • Motorcycles
    • Recreational Vehicles
    • SUVs
    • Trucks
    • Vans
    • Branding
    • Business Opportunities
    • Careers and Jobs
    • Corporate
    • Customer Service
    • Direct Mail
    • Entrepreneurship
    • Ethics
    • Financing
    • Franchising
    • Home-Based Business
    • Human Resources
    • Import and Export
    • Leadership
    • Management
    • Market Research
    • Marketing and Advertising
    • Negotiation
    • Network Marketing
    • Networking
    • Organizational
    • Presentation
    • Project Management
    • Public Relations
    • Small Business
    • Strategic Planning
    • Team Building
    • Telemarketing
    • Training
    • Data Recovery
    • Databases
    • Games
    • Hardware
    • Networks
    • Operating Systems
    • Programming
    • Security
    • Software
    • Spyware and Viruses
    • Ask an Expert
    • College and University
    • Home Schooling
    • K-12
    • Languages
    • Online Education
    • Psychology
    • Coffee
    • Cooking
    • Gourmet
    • Recipes
    • Wine and Spirits
    • Acne
    • Aerobics
    • Alternative Medicine
    • Beauty
    • Cancer
    • Cosmetics
    • Depression
    • Diabetes
    • Diseases and Conditions
    • Fitness Equipment
    • Fitness
    • Hair Loss
    • Heart Disease
    • Medicine
    • Men's Health
    • Muscle Building
    • Nutrition
    • Skin Care
    • Supplements and Vitamins
    • Weight Loss
    • Women's Health
    • Yoga
    • Arts and Crafts
    • Babies
    • Collecting
    • Elderly Care
    • Genealogy
    • Hobbies
    • Parenting
    • Pets
    • Pregnancy
    • Woodworking
    • Feng Shui
    • Gardening
    • Home Appliances
    • Home Security
    • Interior Design
    • Landscaping
    • Affiliate Programs
    • Article Marketing
    • Auctions
    • Audio
    • Banner Advertising
    • Blogging
    • Broadband
    • Domain Names
    • E-Books
    • E-Commerce
    • Email Marketing
    • Ezines and Newsletters
    • Forums
    • Internet Marketing
    • Link Popularity
    • Pay-Per-Click
    • Podcasting
    • RSS
    • Search Engine Marketing
    • Search Engine Optimization
    • Security
    • Social Media
    • Spam
    • Video
    • Viral Marketing
    • Web Design
    • Web Development
    • Web Hosting
    • Copyright
    • Cyber Law
    • Intellectual Property
    • National, State, Local
    • Patents
    • Regulatory Compliance
    • Trademarks
    • Buying
    • Selling
    • Baseball
    • Basketball
    • Boating
    • Cycling
    • Extreme Sports
    • Fishing
    • Football
    • Golf
    • Hockey
    • Hunting
    • Martial Arts
    • Running
    • Scuba Diving
    • Soccer
    • Swimming
    • Tennis
    • Dating
    • Divorce
    • Marriage
    • Weddings
    • Astrology
    • Buddhism
    • Christianity
    • Faith
    • Hinduism
    • Islam
    • Judaism
    • Meditation
    • Metaphysical
    • New Age
    • Cable and Satellite TV
    • Cell Phones
    • Communication
    • Gadgets and Gizmos
    • GPS
    • Satellite Radio
    • Video Conferencing
    • VoIP
    • Addictions
    • Coaching
    • Goal Setting
    • Motivational
    • Stress Management
    • Time Management
    • Clothing
    • Electronics
    • Fashion
    • Gifts
    • Jewelry
    • Causes and Organizations
    • Environment
    • History
    • Holidays
    • Men's Issues
    • Nature
    • Philosophy
    • Politics
    • Women's Issues
    • World Affairs
    • Air Travel
    • Camping
    • Cruises
    • Destinations
    • Outdoors
    • Article Writing
    • Book Reviews
    • Copywriting
    • Fiction
    • Non-Fiction
    • Poetry
    • Quotes
    • Screenplay
    • Tools and Resources