Art of War Chapter 1 Summary explores the five fundamental factors that define a successful outcome. By thinking, assessing and comparing these factors you can calculate a victory, any deviation from these points will ensure failure. Remember that war is a very grave matter for your country. It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject that cannot be taken lightly.
Translation for investors:
- Make conscious decisions before you act
- Evaluate your options
- Look for strategic returns
By failing to prepare, you are preparing to fail
– Benjamin Franklin
What Type Of Investor Are You?
Before you spend a dime or dedicate any time towards investing, it would save you loads of heartache and pain if you figured out what type of investor you are. This should be based on your risk tolerance, investment time frame, and financial knowledge. I have compiled a list of the investment types below:
Value Investor – This type of investor conducts fundamental analysis to determine the intrinsic value of a company then purchases shares at a discount to that value. This analysis is generally done using metrics such as P/E Ratio, Price to Book Ratio, etc.
Day Trader – These guys were a dime a dozen back in 2000. People could get rich by simply buying stocks in the morning then selling by close. Anyone can be a stock market genius during a massive bull market. Typically a day trader looks to hold a position for no longer than a trading day. He/She is looking to make small consistent gains on their position.
Swing Trader – There primary focus is to find short term positions in the market that they can hold for a couple days then produce a profit. The best example that comes to mind are traders that purchase a stock prior to earnings being announced then sell after favorable news has pushed the stock price higher.
Technical Analysis Traders – Depend solely on graphs, charts and indicators. They could care less about the company or the business, their main objective is to find potential setups that will result in profitable gains. This type of analysis is one of my personal favorites although I do not rely on it 100%.
Income Investors – Typically focus on dividend growth stocks. The main objective is to create a portfolio of companies that increase their dividend on a yearly basis and will continue to pay them for years to come. Aggressive income investors reinvest their dividends to purchase more shares until they will actually need the income produced from the companies. In this day and age with rapid inflation as a possibility this is one of the best ways to defend your wealth from being eroded.
Passive Investors – Individuals who do not wish to take it upon themselves to invest their money. They typically hire an investment advisor or pour all of their capital into a mutual fund through their respective retirement vehicles. My personal view on passive investors is dual sided. While I applaud individuals for acknowledging they are not fully educated to make their own investment decisions and therefore seek the necessary guidance, I still recommend educating yourself and eventually taking control of your portfolio because nobody cares more about your financial situation than you.
It is absolutely imperative that you determine what kind of investor you are as quickly as possible. Once you accomplish this you need to develop a plan and stick with it! Investing is a very long and adventurous journey. I recommend that you do not flip flop or run at the first sign of trouble because I absolutely guarantee you will have unfavorable investments. Always remember to never quit and strive to become better every day.
If you quit once it becomes a habit. Never Quit!
– Michael Jordan
What type of investor are you? How long did it take you to determine which mold you fit?