Tuesday, May 1, 2012

How to Get Rich - Avoid The Big One

Have you ever wondered how the rich continue to get richer no matter what ?

Even in bad markets they seem to prosper, that is true.

Positioning


One of the biggest mistakes many individual investors make is they don't know their position on each individual investment. They don't develop a plan with each investment prior to investing their funds.

The experienced investor knows exactly how much of a gain and or income he/she wants before making the buy decision. They basically have a plan of what they feel each investment should do for them before deciding on the investment.

Know The Range


Most investments have a point where it makes them very profitable to buy. When these investments reach this point, the experienced investors buy. When their values increase over time, their buy in profit decreases and therefore makes them less desirable to most investors.

When other investments become more profitable than their current one, many experienced investors will decide to sell, take their profits and move on to the more profitable choice.

This range in points is known as the trading range. The experienced investors know exactly when to buy and when to sell beforehand.

Avoid The Big One


Much wealth can be lost if an investor has bad positioning. This happens when an investor buys too late and at too high a level compared to the experienced investors. A sudden trend reversal, which will happen when the experienced investors start selling, will leave this individual in a loss position.

To limit the loss, the individual should know ahead of time at what point to exit if things don't work out. Take a small loss and move on to the next opportunity. Never ride the position down hoping for a recovery. This recovery may never come.

Remember that we all make mistakes no matter how much experience we may have. The key to building wealth is to limit your losses on your mistakes and move on to the next positive opportunity. Do not turn your small mistake into the big one that could destroy your wealth.

As always, I welcome your comments and suggestions for new topics.


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