Confidence is the key to approach prospective buyers and sellers and make a good deal for oneself. Self-confidence, along with self-belief is one of the keys to success. To succeed in any business venture it is important to stay focused on your goal. When making an investment decision after thorough research, stand by it. Even when you encounter several problems in your way, accept and face them. Be firm and clear as to what you are looking for in the deal and have the courage to walk out of the one you think isn’t good for you.

Before finalizing any deal it is very important to understand real intentions and motivations of the people you are dealing with. It is always good to know the reason for the property being listed. It also helps you in developing an emotional bond and trust with the other party making him work with you more often. A successful investor looks for opportunities in every situation. When dealing with a vendor with some property problems, try to acknowledge and fix them. This will place you in better position in addition to making money for you.

Before buying any property it is important to thoroughly research the target location. Examining the neighborhood areas and recent market trends will help you make a better investment decision. Comparing property values with identical ones in similar areas is a good idea. It is important to plan ahead as to how much you are wiling to spend on the property and what you finally intend to do with it. By acknowledging the needs and requirements of perspective buyers you are sure to strike better deals for yourself.

Successful investors believe in teamwork. Building a competent team of surveyors, builders and real estate agents always helps in this profession. It is important that you set an apt budget before you begin. A wise property dealer does not invest all of his money into the purchase. You should learn to utilize public money such as loans from banks etc to invest extensively.

A successful property investor is one who is not scared of making mistakes but rather takes the opportunity to learn something new. In real estate business, with experience comes knowledge. It is therefore important to keep in touch with successful professionals in this arena to learn their strategies and approaches. A successful investor has a different mindset and considers long-term capital gains when speculating a property. It is well said - “Winners don’t do different things, they just do things differently.”

Tags: venture, investment, profit

38 million people have put up their very first websites online this year 2005 alone. It is estimated that by 2008, the internet sales industry will top then dollar bank. And to think, majority of those sites will be offering different affiliate programs for people to choose and participate into.

This only means one thing. It is easier now to find the right web host for your application. The possibility of quality web hosting companies separating themselves from the rest of the industry is anticipated. If this is done, the unprofessional and incompetent ones will suffer.

Support will be the number one consideration for people when choosing a web host. It will be obvious that traditional advertising will become less and less effective. Most people would rather opt for the web host based on things that they see and hear. Also based on the recommendations by those who have tried them and have proved to be a successful.

This is a great opportunity for web hosting affiliates and resellers alike. There would hundreds of web hosting and programs to choose from that the difficulty in finding the right one for them is not a problem anymore.

How does one become a successful affiliate in the niche markets using web hosting?

If you think about it, everyone who needs a website needs a web hosting company to host it for them. As of now, there is really no leading hosting industry so most people choose hosts based from recommendations. Usually, they get it from the ones that have already availed of a web hosting services.

With the many hosts offering affiliate programs, there is the tendency to find the one which you think will work best for you. Think of the product you will be promoting. Pattern them to the site and see if they are catering to the same things as you are.

When you have been with one host for quite some time and seem not to be making much despite all your effort, leave that one and look for another. There is no use in trying to stick to one when you would be before off in another one. Things will only have to get better from there because you already have been in worst situations.

Try this out. If you are quite happy and satisfied with your web host, try to see if they are offering an affiliate program you can participate on. Instead of you paying them, why not make it the other way around; them paying you. The process can be as easy as putting a small “powered by” or “hosted by” link at the bottom of your page and you are already in an affiliate business.

Why choose paying for your for your web hosting when you do not have to? Try to get paid by letting people know you like your web host.

Always remember that when choosing a web host, choose the one that is known for its fantastic customer support. There are also many hosting affiliate programs. Residual affiliate program is also being hosted. This is the program wherein you get paid a percentage every month for a client that you refer. This can allow you to have a steady source of income. With perseverance, you can even be quite successful in this field.

There are a lot of niche markets out there just waiting for the right affiliate to penetrate to them and make that dollars dream come true. Knowing which one to get into is being confident enough of your potentials and the good results you will be getting.

Web hosting is just one affiliate market you could try out and make some good and continuous income. Just remember that to be successful on your endeavor also means that time, effort and patience is needed.

Nobody has invented the perfect affiliate market yet. But some people do know how to make it big in this kind of market. It is just knowing your kind of market and making the earnings there.

Tags: venture, investment, profit

The latest News can affect all Markets- All Traders know this

So it is very important that we get the latest news, and as it happens.

This why the wall street journal is the first tool that every trader needs.

The wall street journal is arguably the most important trading tool that any trader can use. The Wall Stret Journal which is now also available online is have a fantastic special were for a short time it purchased with a 75% DISCOUNT so you can get it for $1.99 per week. With the choice of online or print .so known as wsj, Wall Street Journal is one of the most popular Financial newspapers worldwide.

The Wall Street Journal is nothing less than America’s true newspaper of record, a window on the world of business, finance, international affairs, and all the delicious little nuggets of news that would otherwise slip through the cracks. Wall street journal newspaper covers financial and other news;  the  wall street subscription price is low and very competitive,  and this is why readers prefer it amongst other competitor newspapers.

Wall Street Journal is one of the biggest USA newspapers by circulation. A complement to the print newspaper, The Wall Street Journal Online was launched in 1996. The Wall Street Journal claims to have sent the first news report,[citation needed] on the Dow Jones wire, of a plane colliding into the World Trade Center on Sept.

News

As a registered user of  The Wall Street Journal Online, you will be able to:. It “will provide up-to-the-minute business and financial news from the Online Journal, along with comprehensive market, stock and commodities data, plus personalized portfolio information–directly to a cell phone. News alerts via  & science Science Space Tech and gadgets Wireless Games Security Innovation Health Travel Weather Local   Video Photos Community Disable Fly-out Marketplace Shopping Get a Holiday Deal Wall Street Journal launches social network Web site borrows from Internet hangouts like Facebook to boost usage  MSN Tech and Gadgets Innovative tech coming to CES 2009′Naughty’ names are deprived of e-mail.

The newspaper has won the Pulitzer Prize thirty-three times[3], including 2007 prizes for backdated stock options and for the adverse impact of China’s booming economy. A complement to the print newspaper, The Wall Street Journal Online was launched in 1996. Many Wall Street Journal news stories are available through free online newspapers that subscribe to the Dow Jones syndicate.

This is the BEST BUY on the Internet

The content of the WSJ is unparalleled. In fact, the online WSJ is vastly more streamlined than Forbes, Fortune, CNN, etc. There is something for everyone in the  WSJ.

Its reputation secure as the nation’s preeminent business news and conservative opinion newspaper, The Wall Street Journal nevertheless fell on uncertain times in the 1990s, as declining advertising and rising newsprint costs—contributing to the first-ever annual loss at Dow Jones in 1997—raised speculation that the paper might have to drastically change, or be sold. [10] It is commonly held to be the largest paid-subscription news site on the Web, with 980,000 paid subscribers in mid-2007.

Also known as wsj, Wall Street Journal is one of the most popular Financial newspapers worldwide. Please Note: After you complete the simple subscription process you will be able to start accessing your free trial subscription to WSJ. I subscribed to WSJ Online and used a credit card to pay. I’ve been a subscriber for a few years now, and the WSJ is the first thing I read every morning. The WSJ offers a similar variety of subjects with more depth. There is something for everyone in the WSJ. The WSJ offers a similar variety of subjects with more depth.

It is of course a remarkable offer getting the wall street journal at $1.99 per week, which can be purchased monthly or on yearly basis, this is must for every trader in 2009

Tags: investment, venture, profit

Banks have been doing this for hundreds of years. They take depositors money and make loans and mortgages with it. They pay a low interest rate to the depositor of the money and collect a higher interest rate from the borrower. So in a way people have been lending to people indirectly for a long time.

Peer to peer lending is what happens when there is less bank involvement. The bank in some sense becomes a financial intermediary that connects lenders to borrowers. The transaction are underwritten and facilitated by this intermediary but in exchange for less involvement they ask for a small return. Often this takes the form of fees for doing the loan and a small piece of the interest rate charged to the borrower. Since the money is coming directly from individual, the risk in some ways transferred directly to the individual lenders. Moreover, since there is a transfer in risk, the return must be higher for the individual lender.

Now, are you already thinking that this is for you or no way? Well, you might already come to the conclusion that if you are a saver, you want no part. This is understandable and there are very specific reasons as to why. First, why are you putting you money in the bank anyway? The answer more than likely is that is safe. The banks do not expose you to any of the risk on the loans they give. In return you get a low interest rate. Second, the money you have is liquid. You can get it at any time and regardless of the bank lent your money previously they must honor your withdrawal. If you lend your money in peer to peer lending, your loan pays over time and it is impossible to truly get your money out without selling your right to the loan.

We have only talked about risk, but there are the returns. If you this has sparked your interest, you could be an investor. The returns listed by lending club.com are anywhere from 6.69% to 19.37%. This is a far improvement over what banks are paying in savings accounts. Furthermore, every loan is underwritten by the financial intermediary, checking borrower’s income, credit statement, credit rating and background. They handle as a normal loan by a bank and borrowers that don’t meet quality standards are declined. The default rate listed also by lending club is 2% in last 120 days. Lastly, there is potential of diversification with peer to peer loans. You don’t have to fund just one loan but several. This spreads you money out between several different loans and loan grades further hedging your ability to avoid default by borrowers.

Now, savers are not investors and vice-versa. It depends on what you are actually looking to do with your money. You always need to weigh your options or seek professional advice, but peer to peer lending could provide one way for a saver to become an investor.

Tags: venture, profit, investment

Tom Petters (alleged) investment scheme is estimated to have cost his investors $3 billion in losses. Bernie Madoff’s $50 billion Ponzi scheme has just blown up over the past few weeks. The $50 billion Madoff losses are the largest fraud-related investor losses in history by a wide margin. What lessons can investors learn from these recent giant fraud schemes to protect themselves in the future so they aren’t duped as well?

1. If it sounds too good to be true, it probably isn’t true. Returns that are well above the market or that are amazingly consistent through any type of market demand lots of questions. Be skeptical. Petters was supposedly promising some investors big returns every 90 days. That is just not realistic and doesn’t make common sense. Why didn’t he just give investors a steady 12% return per year (or borrow at 6%-8%) and keep the rest for himself if it was such a great business/investment? Madoff supposedly produced equity returns that were amazingly consistent at +1% per month regardless of how much the stock market rose or fell during the month. Again that’s too good to be true.

2. Don’t chase returns. You are likely late if you are chasing great recent historical returns.

3. Risk is always highly correlated to returns. There is no free lunch. Be wary of guaranteed returns and/or promises of above market returns. If your manager is producing great above market returns, he is probably taking above average risk to get there. Be skeptical.

4. Wealthy people are often not any smarter or more ethical than regular people. Both of these investor frauds had lots of wealthy, smart people and companies as investors. Greed is a universal emotion that may even be stronger for wealthy people. The more you have, the more you want even more. Sometimes the rich are the “dumb money”.

5. Trust, but verify. Ronald Reagan said it best. Some people who did their homework on Petters and Madoff decided not to invest. Get verification from third parties, referrals, background checks, brokerage statements from an un-related custodial brokerage firm. Do your due diligence to check things out or have an advisor you trust do it for you.

6. Beware of conflicts of interest. Petters was paying his associates million dollar bonuses to keep them happy and going along with the scheme. Bernie Madoff had his sons working for him and his brother-in-law was his accountant. Madoff owned the investment firm and the brokerage firm that was doing all the trades so it was much easier to fudge the numbers. Is the financial incentive of your investment manager/advisor aligned with your interests? Always? Ask the question.

7. Make sure your investment manager is using a separate, independent, and well-known broker/dealer as the custodian for your assets. Make sure your assets are at a custodian firm who is independent of the investment manager. Is it a custodian firm you have heard of? Madoff owned and ran both and therefore there was no outside party to verify things. The fox was guarding the henhouse. Madoff’s client statements did not come from an independent custodian such as Fidelity, Schwab, or TD Ameritrade. They were from Bernard L. Madoff Investment Securities, LLC. Madoff himself controlled what the statements said. Did Petters even use a custodian? Make sure you get regular statements from the independent custodian investment firm, not just from your investment advisor.

8. Never write checks or send deposits directly to your investment advisor. They should be written to the investment advisor’s firm or preferably directly to the custodian firm that is holding the assets.

9. Diversify. Don’t put 100% of your investment in one hedge fund strategy like many Petters and Madoff investors did. They likely did this because they were getting such great returns (for a while) there. Now they are completely wiped out.

10. Watch your risk levels. Again many investors had most or all of their money invested with just one hedge fund strategy (Petters or Madoff). That is too risky for any investor.

11. Get your investment agreement in writing. It is smart to have an Investment Policy Statement (IPS) that outlines your investment strategy and parameters in writing. You should also have the investment agreement between you and the investment manager in writing.

12. Hedge funds can be risky. They are mostly unregulated, often secretive, expensive, and usually not transparent. You often don’t know how much risk they are really taking.

13. Don’t invest with a money-manager just because of their reputation. Check them out. Do some due diligence. Understand their strategies and make sure they make sense for you. Business success and social prominence doesn’t ensure safety or soundness in investments. They also don’t ensure the highest ethical standards.

14. Use common sense. Did it make sense that Petters could buy electronics from Sony and then sell it to Wal-Mart and make big returns? I don’t think so. Wal-Mart is a smart company with big buying power and smart purchasing agents. Petters was in some of the toughest businesses in the world (electronics, airlines, Polaroid) and was supposedly making huge money in them? Madoff made 1% each month in stocks when the market was down big or up. Does that make sense? How can he do that? Ask the questions.

15. Don’t invest in things you don’t understand. This is one of the best rules of investing. You should understand the structure of the firm you are working with, the investment philosophy, and the investment process. I’m sure most of Madoff’s investors had no idea what his “split strike conversion” equity strategy was. How many investments do you own that you don’t understand?

16. Avoid “secretive” and “unusual” investment strategies and managers. Demand transparency. Ask lots of questions. Read through your brokerage statements carefully to make sure you understand what is going on. Petters and Madoff were both secretive about how they were producing these great returns and discouraged investors from asking about their “proprietary” strategies. Madoff would toss investors out who asked too many questions.

The Petters/Madoff scandals are another reason for investors to lose confidence and trust in the financial markets. Most investment advisors and money managers are good and honest people.

Tags: investment, profit, venture

Successful long term investment is not just about buying low and selling high.

Stock markets rise and fall, and share prices are vulnerable to everything from political news flow to the weather. Trying to find your way around - particularly during times of high volatility and uncertainty - can feel like negotiating a minefield.

So how can we make sense of such a confusing world? It is probably time to go back to basics - stock markets may rise and fall, but the rules of sensible investment remain constant.

Rule 1: Buy what’s right for you.

Just because an investment works well for somebody else does not mean it is right for you. Consider your own situation - your future liabilities, your investment goals and, most importantly, your appetite for risk - and then make your own decision.

Rule 2: Diversify.

Spread your risk by diversifying your portfolio across a mixture of asset classes, industry sectors and areas of the world. If you put all your money into a single asset class,sector or company, your portfolio is very exposed and performance is likely to be volatile - whereas, if you mix it up, when one asset is going down, chances are, another asset could be going up and will help compensate. Don’t put all your eggs in one basket.

Rule 3: Invest for the long term.

It’s hard work - and largely pointless - trying to time your investment so you buy right at the bottom and sell right at the top. Similarly, trying to make short term profits by turning over investments quickly will get expensive and carries a high risk. Instead, target your portfolio at quality companies or funds and then allow them the time and space they need to grow.

Rule 4: If an investment has risen substantially, take another look.

There is an old rule of thumb which says ‘when your investment doubles, sell half’. Short term sentiment in stock markets can drive values artificially high, in which case, you may want to cash in while you can. Don’t get greedy - you should never be ashamed to take a profit.

Rule 5: Never buy what you don’t understand.

History is littered with funds which promised a great deal but which, when faced with pressure from the market,collapsed with all those promises broken. Some shares or funds might sound very exciting and, indeed very simple,but if you don’t understand exactly what the company does or how the fund works, steer clear.

Rule 6: Know when to say goodbye.

If a holding has performed particularly badly relative to its peers, you need to consider cutting your losses and selling it altogether. It might be better to sell out and reinvest the proceeds into a quality alternative than to sit around hoping to recoup your loss.

Rule 7: Don’t get emotionally attached.

It’s wonderful if a holding has worked for you, but you don’t have to feel grateful: the share doesn’t know that you own it. You should look at every existing investment with the same clear headed objectivity as you did before you bought it - and when it’s time to sell, do so with a clear conscience.

Rule 8: Be your own person - don’t follow the herd.

Many investors became caught up by the euphoria which surrounded the dot-com boom of the late 1990s simply because everyone else was and they did not want to miss out. Consequently, they bought shares in companies that promised much and delivered little or nothing. It is hard to turn against the flow but always take a step back and think not just about what you are buying, but why.

Rule 9: Review your portfolio regularly.

Your portfolio has been set up to meet your objectives based on your needs today. However, over time, your needs and circumstances can change. The markets can also change - and your portfolio may need the odd tweak to make sure it keeps up. Review it regularly - perhaps every one to three years - and make sure it stays on track.

Rule 10: Don’t believe everything you read!

Headlines on TV and in the finance sections of newspapers can be just as misleading without investigation as they are in celebrity news and sport. Make sure you keep a clear head, remain focused on your objectives and take advice from a qualified professional to ensure you are making the most of your investment portfolio.

If you would like to take a closer look at your own circumstances and discuss the best mix of investments to meet your needs, speak to your professional financial adviser.

Tags: profit, venture, investment

Falling sales and rising foreclosures has chopped 18% from home prices in 20 major U.S. cities from Oct. 2007 to Oct. 2008, the fastest rate on record.

According to the S&P/Case-Shiller index, home prices in Phoenix, Las Vegas and San Francisco sunk the most - giving back 32.7%, 31.7% and 31.0% of their value in a year’s span, respectively.

The ocean-side metros of Miami, Los Angeles and San Diego followed, with respective declines of 29.0%, 27.9% and 26.7%.

Atlanta, Seattle and Portland entered what Case-Shiller called “the double-digit club,” with annual rates of decline of 10.5%, 10.2% and 10.1%, respectively.

The three best performing housing markets - meaning the ones that lost the least value - are Dallas (-3.0%), Charlotte (-4.4%) and Denver (-5.2%).

On a monthly basis, Detroit was hit the hardest, with home prices falling 4.5% from September to October of this year. That’s a dramatic leap from the 2.5% decline from August to September.

“The bear market continues; home prices are back to their March, 2004 levels.” David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s, said in a news release.

Recent statistics from the National Association of Realtors suggest similar pain. Single-family home sales fell 8.0%, the slowest sales growth since July 1997, NAR reported last week.

And the national medium home price fell 13.2% from last year to $181,300, the largest drop since the NAR started tracking statistics, and likely the largest decline since the Great Depression, said Lawrence Yun, the trade group’s chief economist.

“Falling home prices would lead to faster contraction in consumer spending and further deterioration in bank balance sheets,” Yun said in a news release. “More importantly, falling home values would lead to higher loan defaults, including those recently modified distressed mortgages.”

Tags: profit, venture, investment

As an angel investor or venture capital investor, you are always looking for the next big investment. In our current environment, as always, there are many deals looking for seed capital.

Most of us who qualify as accredited investors or qualified investors know, that most of these venture investments will fail. How do you choose the next big angel investment?

Here are a few things to look for:

You want people who are totally dedicated to their business, not those who are trying to make a fast buck on the latest fad. If they have the company logo secretly tattooed on their arm, they are for you. If they say things like “If this tech thing doesn’t work, I can always go back to truck driving” then run! Your team must be willing to take those strong pains that are the growing pains of a small business.

Smart investors always avoid unfair deals. Let’s face it, in almost all startups seeking seed money, the proposition boils down to “With our brains and your money, what have we got to lose?” The investors should get a big enough piece of the company that if it wins, they win big, because most startups seeking see money will fail.

Granted, deals that favor the investor de-motivate the entrepreneurial team and are also to be avoided. The deal should also be structured to allow the investor to come in and pick up the pieces if the deal goes bad. Most investors won’t want to, and even if they do, there is likely to be nothing to salvage, but give them a prayer.

The company must offer a fair deal. I find that valuing companies seeking venture capital, particularly if they are startups, is very hard. Only hindsight can tell you what the value is. However, it is easy to see that you should get an expert to tell you what the investor expects.

Seed money investors are looking for character in management. There are several indicators of this. The first is a successful track record.

The next is that the handling of investor funds is transparent. If you cannot check the inventory, it isn’t there.

Another sign of character is a scrupulous adherence to the securities laws. Anyone who invests in a deal where the principals are ignorant of the regulations, are making unlawful sales of unregistered securities, and who are paying illegal finders’ fee and commissions to unlicensed securities “brokers” deserves everything they inevitably get. We know that the securities laws are almost impossible to understand and comply with, but there must be a scrupulous effort. Companies who do not bother to find expert securities help are probably not good investments.

As most startups fail, let’s take a look at why. Probably the largest cause of failure is management. While managers need a living wage so they do not have to worry about their own finances while building their company, managers who pay themselves lavish salaries and perks should be shot. Beware lavish spending of any kind. The watchword for a venture company is frugality. Only the cheapskates will survive the hammer and pound of the business world.

Next, although this could be called incompetent management, having a faulty business model is probably the next most serious cause of failure. Volumes can be written here, but the worst crime in this category is failing to do many customer surveys and make them thorough.

Sadly, the next cause of failure is fraudulent conduct. Some companies are formed only to provide the promoters with funds from the investors. They know the company won’t work. The worst of them lie to get the money. No matter how much due diligence you do, you may be up against professional scam artists who make a career of doing this. As this is their career, they are good at it. Or you may be lulled into a feeling of confidence by the stellar reputation of the promoters. It is at this point where the investor must be a suspicious swine. As guilty as he may feel about it, it is his only hope.

The last risk is not that of failure. The risk is that of dilution. The company succeeds but the business is soaking up much more cash than expected and the new stock that is sold dilutes your equity.

As all of us in this industry know, you will spend several times more than you expect and take twice as long as you expect to do anything.

As many venture investors will tell you, the way to really do due diligence is to invest and be inside the company for a year. Only then will an investor see what he has.

I believe that venture companies are our real hope for the future. They will fuel growth and competitiveness. I have a soft spot for the brave entrepreneur who wants to sacrifice his life for his goals. Let’s give him the resources he needs to succeed and do it fast. Then, a year or two from now, we can all look back on this as the start of a great deal for all concerned. That is what we all want, isn’t it?

Tags: investment, profit, venture

From the time we were born, we learned from our mistakes. As investors, we need learn to invest by recognizing our mistakes and making appropriate changes to our investing discipline. When we make a losing investment, do we recognize our mistake and learn from it, or do we attribute it to some outside factor, like bad luck or the market? To make money from your investments and beat the market, we must recognize our mistakes and then learn from them. Unfortunately, learning from these mistakes is much harder than it seems.

Some of you may have heard of this experiment. It is an example of a failure to learn during a simple investment game devised by Antoine Bechara. Each player received $20. They had to make a decision on each round of the game: invest $1 or not invest. If the decision was not to invest, the task advanced to the next round. If the decision were to invest, players would hand over one dollar to the experimenter. The experimenter would then toss a coin in view of the players. If the outcome was heads, the player lost the dollar. If the outcome landed tails up then $2.50 was added to the player’s account. The task would then move to the next round. Overall, 20 rounds were played.

In the first five rounds 75% of the players invested. The number of players fell to 60% by the tenth round. By the end of the game, the number of players investing fell to just over 55%.

This shows there was no evidence of learning as the game went on. If players learned over time, they would have realized that it was optimal to invest in all rounds. However, as the game went on, fewer and fewer players made decisions to invest. They were actually becoming worse with each round.

So how do we learn from our mistakes? What techniques can we use to overcome our “bad” behavior and become better investors? The major reason we do not learn from our mistakes (or the mistakes of others) is that we simply do not recognize them as such. We have a gamut of mental devices all set up to protect us from the terrible truth that we regularly make mistakes. We also become afraid to invest, when we have a losing experience. Let’s look at several of the behaviors we need to overcome.

I Knew That

Hindsight is a wonderful thing. As a Monday morning quarterback, we can always say we would have made the right decision. Looking at the experiment mentioned above, it is easy to say, “I knew that, so I would have invested on each flip of the dice”. So why didn’t everyone do just that? In my opinion, they let their emotions rule over logical decision-making. Maybe their last several trades were losers, so they become afraid to experience another losing trade.

The advantage of hindsight is we can employ logic as we evaluate the decision we should have made. This allows us to avoid the emotion that gets in our way. Emotion is the worst enemy of any good investor. To help overcome this emotion, I recommend that every investor write down the reason you are making the decision to invest. Documenting the logic used to make an investment decision goes a long way to remove the emotion that leads to poor decisions. To me the idea is to get into the position where you can say, “I know that” rather than I knew that. By removing the emotion from your decision, you are using the logic you typically use in hindsight to your advantage.

Self Congratulations

Whenever we make a winning investment, we congratulate ourselves for making such a good decision based on our investing prowess. However, if the investment goes bad, then we often blame it on bad luck. According to psychologists, we, as humans possess this natural mechanism. As investors, this is a bad trait to have.

To combat this bad human trait, I have found that I must document each of my trades, especially the reason I am making the decision. I can then assess my decisions based on the outcome. Was I right for the right reason? If so, then I can claim some skill, it could still be luck, but at least I can claim skill. Was I right for some spurious reason? In which case I will keep the result because it makes me a profit, but I shouldn’t fool myself into thinking that I really knew what I was doing. I need to analyze what I missed.

Was I wrong for the wrong reason? I made a mistake and I need to learn from it, or was I wrong for the right reason? After all, bad luck does occur. Only by analyzing my investment decisions and the reasons for those decisions, can I hope to understand when I was lucky and when I have used genuine investment skill. First, I must document my rationale for making the trade decision. For my Premium Members, I give the rationale for each trade as my way of demonstrating this important discipline.

Luck Becomes Insight

The market is comprised of a series of cause and effect actions, which are not always transparent. This cause and effect has created some interesting behaviors by some very successful people. For example, some baseball pitchers are known to not step on the white chalk line when they are playing. I am sure you have heard of many “superstitions” that people hold to be true to help them perform well.

In an experiment by Koichi Ono’s in 1987, subjects were asked to earn points in response to a signal light. They could pull three levers, though they were not told to do anything in particular. They could see their score on a counter, but did not know that points were awarded completely independent of what they did. Nothing they did influenced the outcome in terms of points awarded. During the experiment, they observed some odd behavior as the participants tried to make the most points possible. Most subjects developed superstitious behavior, mainly in patterns of lever pulling, but in some cases, they performed elaborate or even strenuous actions. Each of these superstitions began with a coincidence. In some cases, the participants would pull levers in a particular sequence. In other cases, even more odd behavior was observed, including a person who jumped off a table and then later jumped up to touch the ceiling to “score” points. Keep in mind the points were awarded either on a fixed time schedule or on a variable time schedule, not based on the action of the participant.

The point of this is that as humans we tend to think that luck is insight. We fail to analyze effectively the situation and the real reason for our success or failure. In investing this behavior will lead to ruin. To help overcome our natural tendency, we must document our investing decisions and then assess the results. This assessment process helps us learn from our success and from our failures and is critical for each of us if we hope to become successful investors.

Conclusion

So what should you document before you make an investment trade? For my Premium Members each stock on the watch list includes three groups of items to document. First, I look at a series of fundamental information such as earnings yield, return on capital, revenue growth, insider holdings, sector, and dividend yield. The fundamental information helps me identify if this is a good company with growing earnings, good management and has potential. After reviewing the appropriate financial information including SEC documents, I identify the risks inherent in the company. These risks might include competition, market share, insider transactions, and any litigation that the company is experiencing. Here one needs to try to identify every possible risk and assess them critically. Finally, I look at the chart of the stock, seeking to identify support and resistance zones. This gives me potential entry points, exit targets, and the trailing stop loss. I complete these sections with a written trading strategy describing how I expect to make my trades. All these investment factors should be documented before making a trade.

To change our behavior we need to document our actions before we make the decision. We also need to be honest with ourselves when assessing our results. As we have seen, it is quite easy for each of us to put on rose-colored glasses and think we are better investors than we really are. We need to assess critically our investing abilities without distorting the feedback we receive from our decisions. Those of us who are able to learn this valuable skill will benefit greatly. Those of us who are unable to apply this learning will be destined to me