I believe that most investors have not “clearly answered” all the issues discussed in this article. After reading these topics, you may feel that they are nothing, they are very basic and clichéd, and most of them don’t take them seriously. What I mean is that you must think carefully, and each question must have a clear answer, and the answer must be yes; otherwise, you are really not suitable for stock market investment.
Questions must be clearly answered
Does your temperament suit you?
Do you believe in the saying “The most important characteristic of investment success is temperament, not intelligence”? Do you understand the meaning behind this sentence? George Goldman (with Pen name of Adam Smith) said, “The stock doesn’t know you own it. If you don’t know who you are, the stock market is an expensive place to find out. We human beings are a bunch of emotions, prejudices, and twitches and that makes it hard for us to understand the market.”
Do you believe what Buffett wrote in his 2004 shareholder letter: “Be fearful when others are greedy, and be greedy when others are fearful” Can you do it?
Why you invest?
Are you investing in the stock market just to make quick money? Is there any other reason? How much return do you think is reasonable? Do you know how to calculate it? Are you passionate about investing in the stock market?
Why choose stock market investment?
Why do you choose the stock market as your investment method? Why not invest in real estate? foreign exchange? gold? bond? Even bank deposits.
What is your tolerance for loss?
Can you accept that the stock market will fall by more than 40% in a short period of time, within a few weeks? This is something that just happened in the first quarter of 2020. Buffett once said: “Unless you can watch your stock holding decline by 50 percent without becoming panic-stricken, you should
not be in the stock market.”
Are you willing to invest the time in research?
Are you going to devote more than an hour a day? Please note: Watching financial TV shows or quotes from Internet celebrities, or checking the closing price of stocks you invested in yesterday on your mobile phone, or even exchanging stock market tips with colleagues, these are not investment research or homework.
Why are you buying what you own? Is the business making money or losing money? What is the outlook for next year? What is the annual growth rate for five years? Who are the competitors? How is his market share?
Is it investing in research or doing your homework? The criteria for judging are actually very easy. You must “actively” read, search for information by yourself, and think independently based on facts.
Have you thoroughtly read the annual report of the company you invested in last year? If not, I advise you to sell the stocks as soon as possible, and then leave the stock market.
Are you willing to invest for the long term?
How long do you consider a long-term investment? One year, five years, or ten years? What is the longest period of time you have held a stock? If your answer is not more than ten years, then there is a high probability that you will not be able to earn a satisfactory return in the stock market.
Are you ready?
Before entering the stock market, the following are the most basic requirements, are you ready? Because the following are the most pressing questions that can affect your investing behavior and can determine your success or failure before you even commit to the stock market.
Do you have enough investment knowledge?
Do you know the operating rules of the stock market you want to participate in? Have you read more than three classic stock market investment books?
Are you investing with living expenses?
Your emergency fund should cover at least three to six months of expenses. Do you have a regular income? Are you retired? Do you need dividend cash flow?
Do you know investment method you adopt?
Are you a conservative or aggressive investor? What is your circle of competence? Do you prefer investing in growth or small caps, or blue-chips? Do you borrow money to invest? Do you invest in derivative financial products such as warrants?
Closing words
Be honest! If any of the questions listed in this article, after asking yourself, your answer is no, I advise you not to invest in the stock market.
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- “Do investing homework by yourself: Necessary conditions for successful investment trilogy“
- “The most important qualifty for an investor is temperament, not intellect“
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