Investing and Speculation

Written by Ioannis Evangelos (Akis) Haramis

People often see other people's decisions asrepparttar result of disposition but they see their own choices as rational!

Investors frequently trade on information they believe to be superior and relevant, when in fact it is not and is fully discounted byrepparttar 150493 market.

On one side of each speculative trade is a participant who believes he has superior information and onrepparttar 150494 other side is another participant who believes his information is superior. Yet they can't both be right!

Speculation (a.k.a. gambling), is not investing, and in one form or another has been around forever!

Many researchers theorize thatrepparttar 150495 tendency to gamble and assume unnecessary risks is a basic human trait. Entertainment and ego appear to be some ofrepparttar 150496 motivations for people's tendency to speculate. People also tend to remember successes, but not their failures, thereby unjustifiably increasing their confidence.

"Psychographics" describe psychological characteristics of people and are particularly relevant to each individual investor's strategy and risk tolerance. An investors background and past experiences can play a significant role inrepparttar 150497 decisions an individual makes duringrepparttar 150498 investment process.

For instance, women tend to be more risk averse than men and passive investors have typically became wealthy without much risk while active investors have typically become wealthy by earning it themselves.

The Bailard, Biehl & Kaiser Five-Way Model divides investors into five categories:


They are risk takers and are particularly difficult to advise.


They like to be whererepparttar 150499 action is and make easy prey for "fast-talking brokers."

Investing and Learning How to Lose

Written by Ioannis - Evangelos (Akis) C. Haramis

One ofrepparttar leading traders on Chicago Mercantile Exchange, because of a single trade lost everything!

For all of his years of experience and money, he had failed to masterrepparttar 150492 most important concept in trading: Risk Management!

Each trader seems to have his own unique way of identifying market opportunities. One buys a stock inrepparttar 150493 hopes of never having to sell it, while another might hold a position inrepparttar 150494 market for a day or even just a few hours. Yet both individuals might be immensely successful inrepparttar 150495 markets. How can that be?

It's because every trader who has been consistently successful inrepparttar 150496 markets has masteredrepparttar 150497 concepts of risk management.

Warren Buffet's two rules of investing are:

1. Never lose money and

2. Never forget rule number 1!

Paul Tudor Jones says that he is always thinking about losing money as opposed to making money. He does not focus on making money; he is focusing on protecting what he has!

Jim Rogers, who for years was a partner with legendary hedge fund investor George Soros, said "My basic advice is don't lose money!"

Bernard Baruch,repparttar 150498 renowned investor fromrepparttar 150499 first half ofrepparttar 150500 20th century advised "Learn how to take losses quickly and cleanly."

Cont'd on page 2 ==> © 2005
Terms of Use