3 Levels of Investor Mindsets

Ein55 Newsletter No 058 - 2017-03-06 - Steps

There are 3 Levels of investor mindset, wisdom gained in their typical investment journey. So, which stage are you in now?  Learn how to be an investor with advanced mindset.

Beginner Mindset

Attend various free seminars, busy record the tips on what stocks to buy, having potential to make some quick money.  Apply “Buy & Hope” strategy.  When investing decision is wrong, holding to losing stock as paper loss, becoming a long-term investor.

Intermediate Mindset
Having some foundation in investment knowledge, could be burnt before during the beginners time when following herd mentality. Willing to pay to learn some useful knowledge in trading system or investing strategies. Apply “Copy & paste” Strategy to use the same methods for own applications.

Advanced Mindset
Learned most of the analysis methods around in the market, eg. FA (Fundamental Analysis) and TA (Technical Analysis), knowing what to buy, when to buy, when to sell. At this stage, a person will finally know that the biggest challenge is to know oneself, there is no single way to make money, having own independent view, adopting a consistent strategy aligning to own personality.

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Some people with more than 20 years investing experience may still have beginner mindset. Most people are at intermediate level of mindset, busy learning the best methods in the world. Only minority of people are advanced investors, level is not measured by years of experience, but by their mindset.

You don’t have to go through a painful learning journey of beginner and intermediate learners. Integrate 3M: Methods, Mind Control and Money Management, learning with the right mindset of Advanced Investors, even you are a total beginner.

Opportunity to Buy Stocks during Level 1 – 4 Crisis

Ein55 Newsletter No 024 - image - Crisis is Opportunity

“Be Greedy when Others are Fearful”, Warren Buffett. 

Many people buy stocks when they feel safe and comfortable, after seeing other people making money, only then they chase after the opportunities, sometimes caught again when market sentiments start to change.  A safe way of buying stock is to wait for crisis, when people worries about the stock market, only then they will sell their best value stocks at discounted price to us.  Every crisis is an opportunity!

There are 4 levels of Crisis:

Level 1 (individual stocks)

– company with falling share price or business, eg. Noble, Keppel Corp, Golden Agri, etc.

Level 2 (sector / industry)

– sector correction, eg. Oil & Gas stocks, Casino stocks, Shipping stocks, etc.

Level 3 (country / region)

– stock market correction, eg. Hong Kong Hang Seng Index, China Shanghai Index, etc.

Level 4 (world)

– Major economy slowdown, eg. China

For a falling stock price (Level 1 crisis), it is only worth considering if it is related to sector correction, not mainly because of own business is declining.  A business may go bankrupt but entire sector/industry would nearly always come back after the winter time is over.  A trader would require minimum Level 2 crisis to buy stocks, currently there are many opportunities for Oil & Gas stocks, commodity stocks, retail stocks, casino stocks, shipping stocks, etc.

However, an investor with higher profit target will need to wait for larger scale of crisis, either Level 3 (country / region) or Level 4 (global market).  The golden investing opportunity of life time is to buy stocks which consistently make money in business (even during crisis) but the stock prices drop more than half because people worry the sky will fall down during global financial crisis.

It can be very easy or can be very tough to grab on the trading and opportunities above to buy low during Level 2-4 crisis. If we follow majority of people to trade/invest normally, usually will end up buy high because we feel more comfortable in a bullish market.  If we could follow abnormal strategies like Warren Buffett did in the past, wait patiently for the giant stocks to fall down, buying them at great discount in Global Stock Sales (as if Great Singapore Sales, GSS) when other traders/investors are very worried, the reward could be significant.