Economy Recovery Boot Camp

Now is the time to get ready…

Do you know when the economy will start to recover or when the stock market will head up again? Nobody does, but nobody is willing to say it won’t. If you’re an average investor now is the time to consider the state of your investments and make some decision about how to move forward. If you’re like many investors who do not actively manage your investments, you probably lost a whole lot of money between June and December 2008, and, frankly, it’s time for you to consider if your old investment methodology makes sense.

Here are some starting points that you should consider…

First, think about why you invest. What are you trying to achieve? What return do you want to get? How much money are you ready to lose? How much do you really want to invest? If you had your money in a mutual fund and lost a lot, then you’ve got to realize that funds managed by large investment firms are actually incredibly risky because they don’t react quickly enough in down market conditions to save your money. It only really works in an overall up market. Frankly, if you’re going to take that much of a risk, why not make more money?

You need to answer a few other basic questions. How much time are you willing to spend monitoring your investments? The more time you spend the less risk you’ll probably be taking. How much time and money are you willing to spend to learn how to invest? Be crystal clear about each of the answers.

To be successful at investing you must learn to separate yourself from your emotions. You can’t be jazzed when you make money and depressed when you lose money. This is the single hardest thing there is to do… and what you can to do acomplish it is to rely on a good investment plan.

A good investment plan consists of three parts. First, it must tell you how much to invest in a given investment. Second, it must tell you exactly when to invest in that investment. Third it must tell you when to exit the investment. It’s got to do all that before you actually invest. That is how you control your risk in any investment. To tell you the truth, if you don’t know those three things ahead of time you shouldn’t invest at all.

The investment plan gives you a course of action to follow, and as long as you follow the plan to the letter, you shouldn’t lose your shirt. In fact you’ll make money. The investment plan also gives you something to evaluate after performed and revise it for better performance the next time. Your investment counselor should be able to provide you with the investment plan they intend to follow or, frankly, they are a joke. You can get great investment plans from many of the trading courses currently on the market.

The best thing about an investment plan is that you can test it ahead of time without using any real money. Certainly any of the markets — stocks, commodities, and forex have ways that you can try investment plans agains historical data. It’s well worth trying.

The simple fact is that people who followed good investment plans with protective stops in place lost far less money between June and December 2008 that people who simply had their money invested somewhere without knowing a clear plan. Take this lesson to heart as the market starts to swing up and you’re ready to start making money.