The first paragraph of this article serves as a catchy summary: The distinction between an amateur and a professional is that an amateur practices until they get it right, while a professional practices until they can't get it wrong. So, where will you source your investment information - from an amateur or a professional? A sound investment decision is rooted in knowledge. Professionals have the answers because they are experts who have spent years studying the field. On the other hand, amateurs lack the time and resources to gather and analyze all the necessary data. This article will guide you on how to become an effective investor, even without an MBA.
A good investment decision is based on knowledge. You need to understand what the company does, how they do it, how well they do it, their market position, who their competitors are, and what new products they are planning, among other things. Professionals have the answers to these questions. They are experts who have spent years studying this field, and their income depends on knowing what's happening and making the right decisions.
On the other hand, amateurs often lack the time and resources to gather and analyze all this data. As a result, many people rely on hot tips from a "friend of a friend" or follow "hunches." This approach often leads to living from paycheck to paycheck and hoping that Social Security will still be around when they retire.
You don't need an MBA to be an effective investor. You can learn where to find good information and how to use it. Consider taking a continuing education class on financial management at your local college or university. Attend a 'how-to' seminar given by an investment company. Join an investment club, like The Wall Street Prophet, and learn from successful professionals.
The Internet has become the most powerful learning tool in the world. Newspapers, trade magazines, and investment magazines all have websites. Companies and investment firms also have websites. With an Internet connection, you have access to more data than the most seasoned professional had a decade ago. It's there, it's instant, and a lot of it is free. So, read it!
A good place to start is with "paper trading." Do the research, pick a stock, and watch it. Do more research, pick another stock, and watch it. After three or four months, you'll begin to get a feel for how stocks move, which information sources are useful, and whether or not your investment instincts are profitable.
The key to successful investing is patience and knowledge. Investors who try to get-rich-quick usually end up poorer. Start small and work your way up. Learn on paper, then by doing. By practicing now, you'll make fewer errors and more money later.
Finally, make friends with a professional investment counselor or financial advisor. You need expert help to make big moves. They're also a good source of advice and guidance. Some professionals may not want you to do any trading on your own, but a true professional will work to make you an educated investor, and help you use the information and the technology to leverage your money into a position where it's really working for you.
As the saying goes, "The only thing more expensive than education is ignorance.
