Don’t be emotional with money

Many of my friends are very concerned these days. They form two basic categories of people.

One are those who are reaching the other side of middle age who are worried that they may not have enough when they retire. Inflation is eating all their savings. 

And then there are those on this side of middle age who think they don’t have many avenues these days to invest. Almost all kinds of investments are giving negative returns.

My advice to most people has been to 
1. Realise yourself – be sure of what kind of financial profile you fall in
2. Act according to your profile
3. Set your expectations correct and stop being emotional about it

Today, I will discuss only the first part, Realise yourself. How does that come about?

I have seen the following category of people in my life:

CATEGORY: AGGRESSIVE
These are typically the folks who can do the following well:
1. Take risks with money and not flinch if they fail
2. They are the mavericks and early adopters of investment patterns, they bet big on aspects of investments that they research “enough” but decide using their “guts”
3. Generally understand the laws of demand and supply

CATEGORY: MODERATE
These are typically the folks who can do the following things well:
1. Take calculated risks and sometimes mourn their loss but never get disheartned, maybe become averse to some forms of investments but in general they take the tested path of investment returns
2. They are the mainstream investors with moderate funding sources, and try only the tested formulae in life
3. Generally understand the laws of leverage

CATEGORY: PASSIVE
These are typically the folks who can do the following things well:
1. Take low to minimum risks when it is about money.
2. They are the laggards, not given to losing money at all.
3. Generally border between paranoia or lethargy. Paranoia of risking the money. Lethargy to do the research to invest properly. It may also come from lack of information, knowledge, education or simply pessimism.

CATEGORY: FRIVOLOUS
These are the folks who:
1. Take “unnecessary” risks – some pay off but most don’t.
2. They are the hearsay guys, and their money follows their heart and ears.
3. They are emotional about their money.

If you know which kind of personality profile you are, next time I will talk to you about what kind of actions you should take to make some money.

In the meantime if you have read or interested in reading check this book out, absolutely fantastic in teaching you the basics of investment.