Keep INVESTING Simple and Safe (KISS)
****Investment Philosophy, Strategy and various Valuation Methods****
The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Successful investors tend to possess certain characteristics. Do you have them? What do you do, if you don’t? The first step to successful investing is knowing your strengths and weaknesses in the investment game. That way, you can work on those shortcomings and make better investment decisions. The MarketPsych website offers free tests you can take to measure your suitability as an investor as well as other aspects of your financial life.
To take any of the tests, you have to register with the site (it’s free). If you’re concerned about privacy, you can register anonymously.
The Investor Personality test helps you understand your personality traits as they apply to investing. The report you receive gauges your suitability as an investor and offers suggestions for improving any behaviors that could undermine your investment success. The test takes about 20 minutes and includes 60 questions about your personality followed by 15 questions about what you would do in different investment situations.
The personality questions cover a lot of ground. Do you tend to think things through? Do you plan? How do feel about change? Are you usually relaxed or easily stressed? Do you like excitement and adventure? Do you enjoy abstract ideas or prefer practical information? Are you confident? Can you juggle several tasks at once? Can you make decisions or do you vacillate? Do you take others’ feelings into account? Do you react quickly?
The investment questions are a bit tougher because they don’t offer answers for the gray areas we all live in. For example, one question asks whether you would choose to spend more now and have less in retirement, or spend less now and have more in retirement. My answer is neither of those alternatives. Another question asks what you would do if you bought a stock and its price increased significantly over a short period — without any news or information about the company. Yikes! I’m an engineer, so it’s almost impossible to make a decision without any information. Some of the questions include one possible answer: watch the company in order to determine a reasonable purchase or selling price, and then make a decision.
The report you receive rates your personality in several ways, such as how conscientious you are, how emotional you are, whether you are an extrovert or introvert, and your openness and agreeableness. Ratings that appear in green (see screen capture, this page) indicate suitability as an investor, whereas yellow ratings are traits that could inhibit your investment success.
The bias section of the report rates your confidence, risk-taking, discipline, thinking, and herding instinct. For example, the hypothetical results include a below-average score in loss aversion. You can click the Click here link to learn how this trait might harm your investing. For example, the Risk-Related Biases Web page discusses the common mistakes many investors make with their investments, such as holding onto a loser hoping for a comeback. Then, it includes specific advice for high scorers and low scorers for each aspect of risk-taking, including loss aversion, emotional vulnerability, risk aversion, and cutting winners short. In this case, the explanation warns that low scorers for loss aversion might take excessive risk.