What should be known to all investors — both experienced, and beginners. The news headings dazzle with loud statements eternally: “End of a bull cycle!”, “The dollar will never be strong currency again!”, “Stock market crashed!”. How not to get confused in all these exclamations?
Stop reading the news
To understand what is the next step, traders read the news. When U.S. Fed raises the interest rate? What's happening in the real estate market? Whether the level of unemployment has grown?
Perhaps, for successful trading, it is necessary just to stop worrying about it. Investors too much worry about some trifles and in vain, wasting time on it. How to decide what news are important and what you should not pay attention?
The markets quite precisely reflect and estimate information on what happens during the period of three to 30 months since a present situation. And, on the contrary, they are not interested in what happens next week or in 10−15 years. Such subjects as the possible bankruptcy of social insurance system, the influence of global warming on the environment or features of the nature of generation zero, simply do not interest them — the markets cannot react to them somehow. It will be too far in the future. The same belongs and to everything that happens literally now — these events will fly by so quickly that reaction to them will be quite weak.
To get used to reacting in this way, it is necessary to think: “If everyone worries about something, I can relax — let them worry about me. I'd better be engaged in something more important”.
People are ready to discuss infinitely what happens when Fed raises short-term rates. Most of the people come to some conclusions — doesn't matter what conclusions. But it is worth paying attention to whether Fed raised short-term rates at the beginning of business cycle before. How the markets reacted to it?
Fed had raised short-term rates already, at the beginning of a cycle — and did so quite often. It is possible to trace each of these episodes, and also what has occurred 3, 6, 12, 36 and 60 months later. And a conclusion will be is as follows: the first increase of rates in business cycle could never be predicted. People worry every time about the same things. And the history teaches us what is useless to worry.
What the young investor should know
First of all young people should remember: it is always simpler to determine “what” but not “why”. Even in such fields as medicine, it is possible to find what solves a problem, but will be absolutely unclear why it works.
Young people have no experience: on the one hand, it allows them to be impartial, but with another, they, in general, do not know what to do. For this reason, they need to read much: so they will learn lessons from the past.
If you are a young investor, the best option is to invest in your knowledge. Create the equity. Understand that you are able and what capabilities you have.
People by nature are inclined to attribute themselves the merits and to restock failures on others. They say: “I have bought these stocks, I'm so smart”, or “I have bought these stocks, their price has fallen in price, I have lost money, it is not my fault”.
But it is necessary to think exactly the opposite. The success of these or those your transactions has been partly just good luck. And failures are your responsibility, and it is necessary to understand what you have done incorrectly. So you will be able to reduce the quantity of mistakes in the future. If you blame others over and over again, nothing good will happen.
The most important in investment is not investment itself. The most important is knowing yourself. If you understand who you are, you will not make a mistake behind a mistake. Have you studied all aspects of trading? Or you take the rash risk because all friends persistently advise you to make it? You have to be strong to resist such pressure. Warren Buffett has once successfully compared investment to baseball. It is not necessary to constantly punch above one's weight. It is necessary just to know yourself, know what you are capable of doing with a bat and what ball you will be able to return and what not.