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The Challenge of Investing

Written by: James Dicks

Article Overview: James Dicks examines the challenges of investing in 2010.

The Challenge of Investing

Every year brings with it new challenges. The global economic situation I'm sure has thrown some new challenges at your investments, but as long as you take precautions prior to any calamitous events, your personal financial situation could remain balanced and relatively stable. The trick is to prepare yourself and your investments for any future drastic market movements. Of course, it is impossible to exactly predict when or if the market will hit new highs or experience a sudden downturn. But if you create a personal financial plan in advance, you might be able to avoid making some basic mistakes, no matter which way the markets move.

The first is a plan I constantly preach, to set your goals, both short- and long-term objectives. Be extremely specific, write them down and post them someplace that will allow you to constantly see them, read them and study them. Follow the plan and try not to make emotional decisions.

Be prepared for anything. The chances of the markets going through a correction are very good. But you must also remember that the markets just might grow in value. Markets go up and down, and you need to be prepared for that. Some investors incorrectly believe they don't need to do anything when the markets are strong and their portfolio is gaining in value.

Don't forget to watch your asset allocation. Know what you are invested in and make sure that you examine where you money is invested a few times each year and determine whether or not it's working for you. You can set a plan to rebalance every month or once a quarter, whatever makes you comfortable. Just don't ignore your investments; keep your eye on the "ball."

Make sure your plan also has diversification built in. I know you are sick and tired of me lecturing about that basic principle of investing, but I continue to hear stories from investors all over the country who keep getting burned because they don't practice proper diversification. If just one segment of the market is providing all your gains, you could end up with an unbalanced portfolio that could possibly cost you in the long run.

Once you determine your investment style, institutionalize it to your personal trading method. When you find something that works for you, don't let go of it. Try writing a journal to document your winning trades and, maybe even more important - your losing trades. Just like writing down your goals and ambitions, physically writing down the particulars about your winning and losing trades will burn the experiences into your mind permanently so you'll know what to do, or what not to do, the next time.

The information available to us is almost infinite. Unlike other parts of the world, most of us in the United States have the Internet, libraries, book stores, magazines, workshops, college courses, television programs and radio shows that can teach us about the various strategies of investing. Find the plan that works best for you and make sure you feel comfortable with the manner in which you are involved in the investment community. If you need help, find an investment professional who can be a mentor and a guide. The more you learn, the better off you will become.

Happy Investing in 2010!

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Article Tags: asset allocation, diversification, economic, forex, goals, investing, james dicks, money, personal finance, premieretrade, stock markets, stocks, trading style



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