'Most people who make a lot of
money in the markets over the long term do not trade
frequently.'
- James Morton, 'Investing with
the Grand Masters'
What kind of investor are you?
Before you buy any shares at all, you should be
clear in your own mind about what your investment
goals are and the type of investor you want to be.
Are you investing for the long-term, or are you
hoping to make money fast by playing the markets,
speculating and daytrading? The two approaches are
worlds apart and require completely different strategies.
Broadly speaking, the long-term investors will make
investment decisions based on the fundamental considerations
outlined in the last section. They'll buy and hope
to leave well alone for maybe five years. Short-term
volatility in share prices won't bother them and
they won't feel the need to monitor their portfolios
on a daily basis.
Traders, on the other hand, have only short-term
considerations. They want to know if the share price
is likely to rise or fall over the next day or week.
So they are much more concerned about the behaviour
of stock markets and the impact of events on share
prices. This kind of approach takes almost constant
attention. In volatile markets, share prices can
drop by 60% in a matter of hours. You can come back
after lunch and find most of your savings gone.
Some investors mix the two approaches. They'll have
long-term investments and then allocate some cash
to short-term speculative punts. Whichever you choose,
just make sure you are sure about it. Falling between
two stools can be disastrous.
'Every morning, I get up and look through the Forbes
list of richest people in America. If I'm not there
I go to work.' Robert Orben, writer and editor
