4 hints to invest your money
When you manage your investment, you need to be aware that your very own behavior may be guided by emotions rather than rational thinking (we’ve already said something about this: see “How to lose money in the stock market“). In fact, there is a whole discipline that studies financial markets from this point of view, called behaviorial finance.
Behaviorial finance is a very approach to look at markets, but it can also teach you a few things about yourself, that you should keep in mind when you invest your own money.
- Learn to know yourself, and your irrationality — you behave, at least in part, irrationaly: your investments should keep that in account.
- Be aware of investment’s risk — underestimation of risk is the path to a unsuccesful investment.
- Do not ascribe a successful bullish-investment to your own skill — there’s no need of much skills to find a profitable stock in a bull market. If you ovverrate yourself, you end up taking excessive risks (see point 2).
- Don’t fool yourself thinking you can control purely random events — there are some things that are random, and you can’t control. If you got luck one time, don’t pretend that it was because of your cleverness.