PHILOSOPHY – one of the 3 important considerations.
In this age of easy internet access, One of the more tempting opportunities for investing is by trading shares on the stock markets. In a previous article I put forward the view that before trading anything on the stock market, 3 important things need to be considered carefully. Here, I want to expand on just one of those issues. This one is about PHILOSOPHY. (The other articles can be found via the author page.)
So, What has philosophy go to do with share dealing?
Trading in shares is no different from any other activity; if you have the right philosophy, it will be better. I do NOT suggest that it will be more profitable. Just that it will be a better experience
As a human being, you will have in your head, a generalized view on life. A guiding principle to help you get through the ongoing mayhem. This Philosophy’, is a product of the physiological frameworks that are constantly forming and changing in your mind, and have been doing so since birth.
You will by the time you are an adult, have a collection of solid views, relating to various parts of your life, each one, a sub-philosophy in its own right. Guiding principles to help you deal with those smaller issues. If trading is going to be a part of your life; you need a philosophy. If you jump right in, your brain will create one for you anyway, over time; but in the meantime, it will cost you in cash and grief. That’s why I advocate working it out first.
Some peoples have better philosophies than others; that is to say, some are more effective and helpful, than others. What is good for one is not necessarily, good for another. What is good, is what works.
Some believe it is a very solemn and serious business, and treat it with great reverence. Some append a social status to share ownership that is out of date and imaginary, but it boosts their self-esteem.
I ,on the other hand, do it for the fun. I believe that all ventures in life should have an element of enjoyment in them. Otherwise, what’s the point anyway?
I trade because the movements of the markets interest me and I can see there is massive potential for becoming very rich. I don’t trade huge amounts. I try to spread my risk by putting smaller amounts into several companies. I consider each trade as a purchase’ as if it were paying the electricity bill, or buying a coat for the kids. In this way, I feel that the money is spent, gone, used. I don’t have the conception in my head that it can be retrieved at a whim. Of coarse I do realize that it may produce some profit, but I don’t rely on that being anytime soon. I have learned that, if I have come to the right decision about the prospects of a share, it can often take a couple of years for the rest of the market to catch up with the idea. This is good; it gives me a head start. This approach also allows for the retrieval of dividends, although I do not select shares for dividend return. Obviously, I enter into trades in order to make profit, but there is more to life than money, and it is wise to remember that at all times! You may be thinking that only a rich man could make a statement like that but that’s not the case here. I simply don’t underestimate the entertainment value, of the activity itself.
That’s my philosophy, but the point I make here, is that you need to work out your own thoughts. Think about why you are trading at all; how often you will trade; and how it fits in with the rest of your life. How does your philosophy of trading, fit with your greater philosophy of life? Are there ethical issues for you? Is the idea frightening? How desperately do you need to make a profit? Will it kill you to lose the money? We all hope to make profit, but the sad truth is, you may make a loss. Believe it or not, both can be nerve-racking and stressful! That’s not good. You need a psychological rigor to rely on. This is your time to prepare yourself. The more (amounts & frequency) you intend to trade, the stronger your mental state must be, and the time to create that state is before you jump in.
With a small investment of time and thought, you are more likely to be happy with the decisions you make, whether they are profitable or not. This way, if it all goes sour, at least you won’t be left feeling bitter and sick.