Why is Investing so Important?

Investment is traditionally defined as “foregoing a present valuable resource in exchange of potential future returns.” One fact about this is that it is ultimately true but what makes it genuinely thrilling is that you need to have a strategy in mind in order to succeed in this quest. The very first step in predicting how well the investment are going to do is by determining the objectives or goal that we want to achieve in investing. By equipping ourselves with knowledge and skills, it would sharpen our weapon cruising the way to the market we are desiring to conquer.

In today’s email, I am going to talk about:

• The First Step: Defining Investment Objectives

• The Crucial Part: Importance of knowing your Risk Tolerance

• Vitalizing: Investment Discipline

THE FIRST STEP

Have a certain goal!

Have a definite amount of what you want to achieve within a specified time frame. Let’s say, to generate ₱100,000 in five months’ time.

Use this as the drive and determination of how much you will invest in the market. By doing this, you will also be able to limit yourself to the risk that you can’t afford.

THE CRUCIAL PART

Identify your risk profile.

Everybody has their own risk tolerance. One person may be at tight budget with obligation to pay bills paycheck to paycheck. Another person may be an inheritor that have recently just received his parents’ wealth. One could lose his investment and it will take a toll on him financially and the other one could lose all his money, but it would not make any difference to his financial capability.

It is important to know how much money we can afford to lose in the market so that we could not risk losing all our hard-earned money.

VITALIZING

Investment Discipline

Decisions that come from emotional investing usually leads to irrational and unwise decisions.

Disciplined investors are those that have come to the acceptance of the fact that the market can be pretty volatile and has its episodes of gains and losses. Not letting emotions cloud our judgment is the best way to go. It is important to remember not to decide amidst frustration.