An important aspect that determines the success of your investment decisions lies in your mindset – it’s not how the world around you is thinking about, but instead what you choose to focus on. There is a lot of information overload, more like garbage in and garbage out. The idea is to disregard the useless noise.
To be successful, you need to have an investment strategy that is in agreement with your personality. You cannot remain a conservative investor while your genes are coded otherwise. This is the primary reason as to why I can’t make do with investing in average yielding ETFs. Surely, the same ETFs would be a very good idea in the downturn.
For instance, when oil was tanking back in 2015, one could’ve bought long put options or just an inverse ETF for the oil sector. The thesis, here would have been the oil market would continue to plunge and you profit from the market action in the oil sector.
Now, what I mean by long put options? Long put options is simply buying put options for a longer time horizon, say 6 months. Considering some companies don’t offer two-year options (known as LEAPS which is an acronym for Long Term Equity Anticipation Security), you’d have to do your research for companies that have a healthy volume of options being traded.
Also, trading the strike prices with an open interest is one-way to tell the liquidity of that certain strike price for the options. Confused? Well, then just get the inverse ETF’s on oil. Again, the above is more like trading but can be viewed as short-term opportunity investment if you know what you’re doing. I would ideally recommend, staying away from options for beginners.
Coming back to the mindset required, while starting up as a small time investor, you need to focus on the bigger picture. You need to make time work for you passively. The emphasis should be to be a part of the economic growth of that company you invested in, in a long run. Surely, you can make investment bets on an investment opportunity in a sector, but don’t catch the trading bug.
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What are your thoughts on this? Do you have a set of questions that you look into before buying a business, and if so what are they? Please share your thoughts in the comments section below.