By: Benedict Smythe
Submitted: 2009-08-28 05:52:50 | Word Count: 536
In the last few years, a willing American audience has read probably hundreds of reputable institutions preaching the value of investment in a time of crisis. Moneymaking investments have gained such popularity that Ordinary Joes are investing in profitable start ups and similar companies on the stock market.
While it is true that some new investments in the stock market and elsewhere are profitable for about a year or so, we cannot say that it will remain that way forever.
[ advertisement ]
When market values begin to drop, you must make sure that you can invest your hard earned money elsewhere. The point is to make your money work for you. Remember, money is equivalent to labor. Consumption merely depletes the equivalent value of your accumulated labor.
Investment on the other hand, increases the value of your labor two fold or three fold, depending on the kind of investment you have.
Understanding risk & investment
Investment in any area of the free market entails a kind of risk. Risks are naturally attached because market values rise and fall depending on the over all condition of the economy.
While many people are still attracted to the DOTCOM boom and bust, people should remain cautious. According to Lesley Collins, a financial advisor and market strategist for the IFA Firm Independent Women:
“A lot of people have made money in technology funds, but when the http://dot.com bubble burst in 2000, many individuals lost a significant amount of their capital as well.”
“The main reason behind this is that many people fall foul of bad investment behavior, where they try to base their decisions on past performance or worse, selling impulsively during short lived market dips.”
Bad investment behavior
What is bad investment behavior? Bad investment behavior can be recognized through the following:
1. Compulsive buying often, hyped up news regarding a new technology draws in many investors. Some people “take the big dip” and put all their life’s savings in just one company. When such company experiences a windfall, people invest even more money. While the process remains unchanged, the risk of losing money is not spread out. If the company crashes, the capital is lost along with it.
2. Panic selling compulsive buying aside, panic selling is also bad investor behavior. Some people sell too much during short lived market dips, to transfer to seemingly robust areas. In the end, the income is cut in half and people are left with depleted capital and a hundred questions floating about their head.
According to Collins:
“This is particularly relevant when you purchase funds or shares when they are at or near their peak, by which stage the gains have already occurred. That is not to say these investments are now a waste of time. You do have choices; which includes leaving the monies invested as they are.”
“With some very risky funds, while they tend to experience a sharp decline when markets are volatile, they can increase quite significantly as well. If you have suffered a loss and do not want to write these monies off, you could uplift a proportion of it and gradually feed this into the market over a period of time by investing in other investment areas.”
Author Resource:-
The author of this article is Benedict Yossarian. If you are facing financial problems Benedict recommends Wilson Field insolvency practitioners for things like Pre Pack Liquidations or Real Claims for PPI Claims. http://www.realclaims.co.uk/http://www.wilsonfield.co.uk/
