Why and How To Learn To Become a Self-Directed Investor

Dec. 9, 2009
Becoming a self-directed, educated investor and controlling your own destiny should become a priority for all professional individuals who lack trading skills.

by Donald R. Berger, DDS, FAAP

All of us have witnessed the positives and negatives of investing in the stock market. Throughout time, we have witnessed the ebb and flow of the marketplace. Within the last decade, we lived through two bubbles and scandals that blindsided even the best investors. These events wiped out large sums of money from defined benefit pension plans, profit sharing plans, 401(k)s, IRAs, and personal assets. Most importantly, these events made investors wary of investing in the stock market for fear of losing their wealth. It is now time for educated and intelligent professionals to learn how to manage their assets to prevent this from happening to them again.

Each investor has a personal wealth-management strategy that varies greatly from investor to investor. Some people are hands-on and want to use their own knowledge and research to find trading opportunities. Others want to use a trading system that helps them determine where trading opportunities exist and aid in the execution and monitoring of the trades. Finally, there are some people who use a combination of these two strategies.

Which trading approach to use is strictly the choice of each investor and highly correlates to the time constraints and personal lifestyle of each person. But the most important lesson to learn from these individuals is that they’re self-directed and educated. The educated trader gets paid for his or her efforts and knowledge. Uneducated investors are at the mercy of brokerages and funds that invest their assets without regard for risk management and money management strategies. It is up to these inexperienced and uneducated investors to find mentors so they can understand the stock market.

Why is education so important? Education is important because it provides the tools, skills, and knowledge about how the markets operate. The most important lesson to learn is money management and risk management, because trading has to be treated as a business. How can this be accomplished? One must take the emotion out of the trade and be able to see it in the form of entry points, exit points, and profit objectives.

Trading is more sophisticated than it seems. It is the mastery of analysis, strategies, tactics, money management, and risk management. Becoming a self-directed, educated investor and controlling your own destiny should become a priority for all professional individuals who lack trading skills. Being educated and strict in your wealth-management strategy allows you to understand your risk at all times. By taking the time to learn and understand the markets, you, too, can become a self-directed investor.

For more information, Dr. Donald R. Berger can be reached by e-mail at [email protected] or by phone at (215) 896-7448. Visit his Web site at www.dberger.org.