Five Steps All Investors Need to Take
This sponsored post has been submitted by CMC Markets, a financial derivatives dealer.
Five Steps Which All Investors Seeking Financial Freedom Need to Take
Financial freedom does not simply fall into our laps. Unless we have been born into wealth, such success requires hard work, dedication and a sound strategy. Let’s examine five tips which should be embraced by everyone who has high hopes for their fiscal future.
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Step Outside of the Comfort Zone
Investment always involves a certain amount of risk. The key to success is not attempting to eliminate this risk, but rather to limit its impact upon your portfolio. Psychology plays an obvious role.
Be prepared to lose money on occasion and always keep your gaze focused on the horizon. If you can step outside of your comfort zone, progress will inevitably follow.
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Consider Trading Options
Options trades are instruments which present the buyer with the possibility (but not the obligation) to sell an asset when it reaches a specific price at a specified date.
Not only can these be used as a safety hedge within a volatile market, but options trading gives investors a chance to earn income from their share portfolios.
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A Balanced Portfolio
This is one of the most well-known suggestions and ironically, many novice traders fail to leverage its benefits. Diversified portfolios tend to be able to overcome volatile markets.
In fact, they also track market movements as a whole without experiencing the knee-jerk reactions often associated with a single position.
Greater levels of stability allow traders to understand the “big picture” in terms of where their investments may be headed. Stocks, commodities, options (mentioned earlier) and Forex positions are all possibilities to be considered.
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Fear and Greed: Avoiding These Two Sides of the Emotional Spectrum
As humans, we are naturally governed by an amalgamation of emotion and logical thinking. The problem here is that both greed and fear are known to dominate the markets as a whole.
Each is associated with irrational decisions that could have otherwise been avoided. This is the reason why it is critical to keep these emotions in check when trading. Greed causes us to take illogical risks while fear forces us to shrink away from a potentially lucrative opportunity.
Of course, it is impossible to eliminate these instincts altogether; we are not robots. The key is to be able to recognize them before they take hold. If you feel that your judgment has become clouded, take a step back and re-evaluate your position before moving on.
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Setting Milestones
A considerable portion of novice investors have a clear goal in terms of the capital they wish to raise and yet, they have not established any type of realistic time frame.
Wealth does not occur from thin air. It takes months to learn the proverbial ropes and in the majority of cases, years will elapse before you will be able to consider yourself sustainability wealthy.
Set specific milestones along the way. You will be able to gauge your progress as well as uncover any trading mistakes that you could potentially be making.
Financial freedom is much more of a reality in these times thanks to the Internet revolution. Still, we should always keep these five suggestions in mind. Forming the correct habits today will allow you to make the most astute fiscal decisions tomorrow.
This sponsored post has been submitted by CMC Markets, a financial derivatives dealer.
I feel the steps are good for a trader, like trading options or stepping out of the comfort zone. For my own money, I would rather be more cautious, and only take the risks I feel comfortable. Just a thought, though.
Yes, you should only do what you are comfortable with.
Those are very important steps to take. Also as important is reviewing and updating your investor profile on a regular basis.
Yes, that’s important too since our risk tolerance changes over time.
“Options trades are instruments which present the buyer with the possibility (but not the obligation) to sell an asset when it reaches a specific price at a specified date.”
Good overview (from a call’s perspective). It helps to think of options as a game of opposites.
Opposite of the buyer of the call is the seller/writer of the call who collects the premium from the buyer; the seller/writer is obligated to sell the underlying security if the option is in the money for the holder of the call (i.e., the option gets exercised).
Thanks for providing the opposite overview Mike.