Decisions, Decisions and Personal Finance

You ask what it takes to become an investor? Jolly good you asked that! It's a question nobody could answer directly. But, it's a question any investor would like answered properly as well.

I'm an investor. I go with the London Stock Exchange. Political decisions do not scare me. We measure everything in a quantifiable manner.

But like any sane person, we play by guts and we understand we cannot quantify everything.

Quantify Risks and Gains

Today's political climate in the UK has the conservatives helming a firm hand over the UK's political ground rule. Sure, Labour and LibDem can often make noise. But the people know it's the tories who are under control and have given much of their benefits nowadays.

But they are not perfect. Us investors recognise that. But so far right now, investing in UK companies and bonds even are great deals.

Play It Safe

Despite great benefits from the tories especially from the humungous real estate sale through the Help To Buy by Chancellor Osborne and the historically low interest rates helped investors to secure more assets. While we know it was meant for Britons to purchase more residences and push up real estate prices, the trouble was it was meant for everyone.

I'm not a kingly investor so I can still apply for the benefit. But it only helped me become richer. At best, that decision was the lowest risk there is. I played it safe and I believe you would agree to that as well.

How Investors Lose Out Their Investments Through Emotions. [Infographic]

Trends and Investing: Avoid Being the Pig

In the stock market and in any other business or industry market, there is the bull, the bear and the pig. Bullish outlooks mean a positive attitude towards trends despite economic implications. A Bearish outlook means a negative attitude. These two investors’ outlooks will signify their actions towards their investments with proper knowledge and analysis. But for the pig, it is all about getting the best from the trend.

Investing trends become popular especially when one investor’s outlook makes sense to the other because of supported fact or a brief prediction of the future based on current news and consumer perception. Pigs normally go with investing trends without thought, simply thinking that the trend can make sure their investments are safe, and can generate them money they deem to be enough.

Pigs normally react with their investments based on certain rumours they find. Often, a tip from another investor or an industry insider is enough to urge them to sell their stocks as soon as possible, or buy the stocks of a downgraded firm because it will pick up the pace in a few months.

They often act with greed, without any consideration to the inherent value of certain details. For example, since the smartphone boom fuelled the rise of Apple and other technology companies on top of the grid, many pigs went to buy the stocks once Apple’s stock value loosened out. However, how are they so sure smartphone technologies are here to stay, and no distant replacement is yet to appear?

Avoid being the pig when investing; never let greed cloud your judgment. According to research, those who buy and hold their stocks, especially investors with a financial plan, are the ones who gained higher profits in the previous few years.

Avoid the Smartphone Plague As Much as You Can

I learned that I should never get caught up in the consumer market race involving smartphones and other mobile internet technologies because in the long run, they would have no value whatsoever. Not unless Apple says that it is shutting down will I ever consider buying a new smartphone from them. My iPhone 4S works just fine.

The smartphone is a plague not just in devaluing live conversations in exchange of digital ones, but because the public takes innovation taken for granted while manufacturers and distributors take all the credit. Anybody investing in smartphones or technology today should know that future innovations will involve the smartphone’s usability with other technologies, and my best bet, the self-driving car technologies, are still yet to arrive.

Cheaper innovation means manufacturers will get innovative ideas from designers and then render them expendable. A lack of innovators will mean a crashing market. As the market falls, so will the value of smartphones. If you’re making a business of buying and selling smartphones in your area, you might get in trouble in three or two years.

Investing in technology manufacturing is a better bet rather than investing in the entire project itself. There is a high risk in innovation as well, so be careful.

Protecting Your Investment Portfolio

No investor wants to get so much upset in their portfolio during a market crash. The worst of the stock market crashes to happen was in 2008-2009 when most people’s stock values lowered to half. However, the stock market still remains one of the best ways to grow your wealth and with good strategy, you could protect your investment portfolio effectively. Here are a few things to remember.

1.    Backup

The stock market has its own grey areas and an investor does not need to be too black or white about their investment decisions. You could always keep some of your money for backup just in case some of your investments fail. Ensuring a part of your investments remain liquidated helps reduce the impact of market downturns. As damages are easier assessed, the investor can then focus on using the downturn as an opportunity for profit growth.

2.    Limitations

Investors are free to hold on to their stock as long as they want, but they need to put a limitation on their stock ownership. A wise investor will sell the stock once it becomes devalued to a certain level. For example, if you put 25% of your purchase value as your limitation, a £100 stock’s limit would become £25. You would sell that stock once it reaches that value. When you limit your losses at 15-30%, you have a chance to recover from your losses. However, when you sell your stock during a sudden upturn, you can’t take advantage of the increase.

3.    Put Options

Put options are similar to stock futures except it allows an investor to sell the stock at a certain price to any other investor. For example, you could have purchased stocks with a price of £20, then you’ve decided to sell the stock if its value lowers to £25. The put option allows you to sell the stocks at such fixed amount regardless of market changes. This is beneficial because an investor could predict the profits they could get precisely.