Thursday, December 26, 2013

Check your Stock tolerance level here

What does 'Risk Taking' mean to an investor? This is an important aspect to being successful in stocks and making money in the markets. Risk taking ability is the most exploited term and most equity investors believe they are high risk takers.
Knowing your real risk taking ability is crucial to be successful. To know your risk taking ability, look at your past record and be honest, how much loss have you suffered in a single stock before you sold?  In my own career as a beginner, I have held on the stocks till they have lost about 50% before I sold. There are people who have sold the moment the stock dwindled from their purchase price by 10%. Almost all investors sell at some stage when the stock price declines, to save their hard earned money as analysts on TV and News Paper proclaim gloom and doom ahead. People who have thus lost money will spend rest of their lifetime investing in Fixed Deposits trying to beat inflation.
Research has proven that investors fear making losses more than they cherish the prospects of making money, that explains the 'Risk taking Ability' and our reaction of selling at a loss.
The solution to this is widely ingrained in our investing philosophy.  The bear markets always come around and if you are invested in the right stocks, call it risk tolerant stocks, you will eventually make money in ways better than a bank FD. Our LearnInvest 9 stock portfolio is a standing example to this. They have gone through the sleep test; I have slept well at night with this allocation of stocks irrespective of market conditions. And this is because I know the business the stock represents.
This new year, we wish all the readers a very prosperous and health life ahead. Our new year gift, a Killer stock that I referred in my previous blog an Apparel Brand that is set to grow for many years ahead. Please email to receive the report.

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