Investing is a three-dimensional juggling act that involves Market Approach (what to buy or sell), Trading and Timing Strategies (when to buy or sell), and Risk and Money Management (how much return and risk to take).  To increase the probability of investment success all the three dimensions should be performed whether you are fund manager or an investor. 

So how do you differentiate yourself from a fund manager? – Basically you come up with answers to the same three questions (what . . . , when . . . ., and how much . . .) using different means.

What to Buy or Sell

In answering the question “what to buy or sell”, most fund managers use fundamental factors, technical indicators and mathematical tools.  As an investor all you need to do to answer this question is to set your goals (retirement, college funding, capital for business, etc.) and to know your risk appetite (aggressive, moderate, conservative). 

When to Buy or Sell

To answer the question “when”, a fund manager again uses many tools (mathematical, cyclical, trend followers, etc.).  To accomplish the same feat as an investor, what you need to do is to determine how much time you have to invest (this is almost automatically determined once the goals are set) and what resources you have available for investing (how much of your monthly salary can you set aside for investing?).  For an investor like you there is only on answer to this question – NOW.  Your success as an investor will not be a matter of timing but of how much time you have to invest.  So start early!

How Much to Risk

Finally in order to manage risk effectively as an investor, you don’t need all those ratios, alphas, betas, audits and what have you that fund managers use to evaluate risk. All you need to do is to choose the right fund and the right fund manager.  Nowadays with all the scams going around choosing the right fund manager is almost as important as choosing the right fund.  Once you have accomplished the first two steps you will realize that choosing the type of fund is best for you will be easy enough because you already know what type of returns (professional financial planners can help you determine this)  to look for in order to meet a specific goal. 

So, to develop that winning investor’s mindset just remember these four simple phrases:

1. You are not a FUND MANAGER! Think Like an INVESTOR
2. Know your GOALS (put them on paper) and RISK APPETITE.
3. Determine how much TIME you have to invest for each goal (the longer the better so start early).
4. Choose the RIGHT FUND, and the RIGHT FUND MANAGER.