Integrated Financial Training: Westchester NY

We have nothing to fear but fear itself...and the fear of fearing fear itself...and the fear of fear of fearing....  

Impact on your Financial Life  

Whether you are investing or gambling has important long run implications for your financial future. Consider that you are gambling without technical skill and suddenly wake up to find you have bought a tobacco company that has announced they are bankrupt. You are going to be very uncomfortable. You need to make a decision about taking a large loss and you have no idea how to evaluate whether it is the right thing to do or not. Then 20 minutes later the price could go up or down by 60%. Whatever you do, you will feel uncomfortable. If the entire market goes into a free fall, you may feel uncomfortable in a similar way as you don’t really understand why. You might lose confidence and sell at the bottom in panic mode. 

Even if you have technical skill, investing based upon greed for selfish reasons is not done in a calm and dispassionate manner. Many clues that you are about to make a serious mistake can be missed. The mistakes will cloud your self reflection trying to pick the spots where you have an edge. You lose patience and just want to force something to work. These are all signs you are walking into trouble and they can easily be missed. You will wind up being confused and very uncomfortable during turbulent markets. 

By investing without greed and with skill, if you understand the reason to buy something and the income you can expect from it is intact, you won’t be so concerned about the drop in price. If the prospects of the company suddenly change, you simply look at the new prospects and determine if it is a good value at the current price. You may also consider how you missed the change in the company prospects and see if you can improve your ability to forecast for the future. If you determine you do not have an edge making these forecasts, you will either study more or discontinue the approach in favor of something better. Based upon these two factors (new prospects for company and updating your forecasting skills) you are better positioned to earn more in the future. Rather than feel you are being whipped uncontrollably by forces you do not understand, you will feel as if you can make sound decisions and will not panic. It is precisely this panic effect that leads to some of the worst investment decisions. 

Review  

Investing vs.. gambling is a popular topic, but close scrutiny of the subject brings out some unexpected points. The real problem is greed. Secondarily, skill in investing is an issue. These two factors must be applied to investing processes. The key aspect of the process is to produce slightly above average returns over a long period of time. This implies patience and a relaxed effort over long periods will produce the desired results. A willingness to accept mistakes and learn from them is an essential component as well. When we apply these notions to fundamental and technical analysis, we find fundamental analysis leads to skill and lack of greed in a more straight forward manner. Technical analysis is not based upon a rationale related to the purchase of a security. By studying the techniques of investing in the context of adhering to the principles above, we can remain calm even in turbulent times and raise our chances of meeting our dual goals of wealth accumulation and finding happiness. 

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