Stock Investing 2011: Get Your New Year Started Off Right
The Dynamic Wealth Report
January 12, 2011
by Justin Bennett, Editor
It’s that time of year again…
Time to set your goals and resolutions for the New Year.
The start of the New Year is the perfect time to start achieving things
you’ve been putting off. Maybe it’s something like losing weight,
quitting smoking, watching less TV, or learning a new language.
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Investors should make resolutions at the start of every year as
well. And in a minute, I’ll go over a resolution every investor should
make in 2011!
But first, let's look at a typical problem with New Year’s resolutions.
Many have a hard time sticking to their new goals…
A month goes by and all of a sudden the resolution isn’t
such a big deal.
Before you know it, you’re back to your old habits. You’re not getting
done what you set out to do.
Falling through on promises to yourself can be a psychological downer.
Yes, a lot of people make a New Year's resolution only to forget about it
a couple months down the road. If you’ve ever done this, you know it can
be a bummer.
Consider doing something different…
This year, treat your New Year's resolution as a contract. Write out the
resolution as a contract and sign on the dotted line. Post the contract
in a place where you see it everyday.
This way you can see you have a written contract to do something. You
may go even farther and pretend the contract is legally binding. If you
break it, you’ll be in big trouble!
If you have a problem sticking with your New Year's resolutions, give my
idea a try. It could mean the difference between success and failure. 2011 may be the year you meet all your personal goals!
Now here’s one resolution every investor should make…
There are a lot of pitfalls to trading and investing. And a New Year’s
resolution is a great way to end bad investing behavior. One of the
biggest problems investors have is taking profits too soon… maybe you
have this problem as well.
Taking profits too early is a sure way to see your investing results
suffer.
Let me explain…
“Closing an investment with a gain is better than closing it with a
loss.” The statement is a very simple and logical conclusion for
investors to come to.
But in reality, it’s not that simple…
Taking a profit just because you have a profit is bad trading behavior.
Why?
Well, if your winning trades aren’t bigger than your losing trades,
you’re losing money overall. Remember, the “golden rule” of investing is
to cut your losers quickly and let your winners run.
By following the golden rule, you’ll assure your winners are bigger than
your losers… and you’ll make money.
If you’re doing the opposite, it’s costing you dearly…
Do you close your winning trades early just to ensure you have a profit? Do you hold onto your losing trades because you don’t want to lose
money? Well, you’re actually assuring your winners are smaller than your
losers. You’re actually assuring you’ll lose money!
Do it repeatedly and you’ll blow your portfolio out of the water.
Now’s the perfect time to write a New Year’s contract to stop this
behavior.
It may go something like this…
I (your name), am entering a contract to make my investing more
profitable. From here forward, I promise to cut all losing trades at $XX
amount. I also promise to only close profitable positions when profits
are at least two times my initial risk.
Signed (Your Signature)
There you have it…
Now you have a New Year's resolution to cut your losers short and let
your winners run. Print it out and tape it next to your computer
monitor.
This simple exercise may make 2011 your most profitable investing
year ever!
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