Investing Life Cycle To Wealth

Article written by Sherin Dev; Follow me in Twitter or Facebook . To get latest news and articles Subscribe for free!

In this article, I intend to go through various stages of wealth creation through investing. For any investor, the time he fixing a goal in mind, his investing life cycle starts. Rest of his activities going through each stages of his cycle and end the journey at the time he is achieving the goal by selling the stocks. With knowledge or without knowledge, no investor would be able to avoid any stage of this process. A through awareness on each stages of this life cycle, help investors to have a quick self checkup and rectify any possible errors possible with any of these stages.

Generally, process of creating wealth through investing on stocks moving through various stages:

Investing Goals >>> Acquiring Knowledge >>> Identification and Analysis of business >>> Time of investment >>> Holding Period > >> Identification of selling time

Each of the above mentioned stages providing a chance to write article separately on each cycles. To get a fast and clear awareness, you can read below, the simple explanation on each cycles.

Investing Goals

This is known as the the preliminary stage of this cycle. It clearly tell us the important requirement of setting goals to achieve through investing. Any value investor, not turn as a right investor if he or she is investing to businesses without any goal. A goal setting is the core of your investing life cycle. Investors generally set goals for short, medium and long terms but, for a value investor, who believe the rule of long term wealth, generally set long term goals by considering the nature of stock investing profit possibilities. Any one who have short or medium term goals, I cannot advise investing to stocks by going these rigorous steps instead, should identify parallel methods.

Acquiring Investing Knowledge

No investor is perfect if he doesn't have enough knowledge on investing. For a value investor, one should first have required skills to analyze the qualitative and quantitative parts of any business to identify the suitability to invest. Through having quantitative analysis skills, one can easily identify the earning potential of a business for a period. Through having qualitative analysis skills, one can identify best businesses to proceed with measuring this earning potential and to invest.

Identification and Analysis of business to invest

This is the most critical stage in our investing life cycle. This cycle can decide whether an investor able to meet the goals or not. In this cycle, an investor required to identify the right business to invest to meet his goals. Any possible happening mistakes in this stage can be costly to any investor by not providing any intended result or lose of money. Nature of such importance made this cycle as the most important one among others. To avoid possible mistakes happening to this stage, an investor should earn excellent skills with previous, 'Acquiring Investing Knowledge' stage and well apply these skills to identify the suitability to invest on a business.

Time of Investment

Deciding the right time of investing to stock have ultimate importance. By remembering the rule "What you paying to buy, always decide your rate of return", an investor should aware whether he required to buy a stock in a particular time or need to wait some more time. To overcome the problem of deciding or understanding right time to buy, keep an eye on macro factors that have influence to decide the movement of any stock market up and down. As I have mentioned with number of my previous articles, an investor should have good awareness on the factors influencing the stock market trends. Some of the examples for this are, economic recessions, industry recessions, temporary bad news on a company, major events in the nation like general elections etc..

Holding Period

If you take the word from Warren Buffett, his holding period is forever!! Most of the investors who heard this word today, may laugh because of the foolishness of holding a stock for long, long time. If you are the one among them and laughing, then you are just forgetting the third stage of this life cycle "Identification and Analysis of business to invest". If the businesses selected by Warren Buffet are capable to give enormous wealth through out the holding period, whether it is short or long, why should Warren sell such stocks? To have high success with this cycle, an investor required to select the businesses that able to give wealth throughout your holding period. The time you identifying such company, you can just move to further stage of this life cycle because, there will not be any question of selling such stocks.

Identification of selling time

Identification of selling time is the most crucial part of investing life cycle. This is a stage can really test the patience and personal qualities of an investor from the very next moment of investing to a stock. As a value investor, one should possess with necessary information on selling time and possibilities. Reading great investing guides from Benjamin Graham and Philip Fisher will help you to identify the exact time to sell a stock.

If you like this post, comment and inform me your opinion. If you have a queries on any of these points, never hesitate to inform me.