What is your investment IQ

jamesmith

You can take the free test from here:
http://www.marktier.com/ippq/index.php

This is my result, some of the points are pretty accurate.


Investment IQ Report Prepared For: jamesmith

The purpose of this report is to identify the investment strengths and weaknesses that have been revealed by your answers to the Investment I.Q. Questionnaire, and to suggest ways you can refine and improve on your current investment practices.

The analysis -- and recommendations -- are based on the winning investment habits of Master Investors like Warren Buffett and George Soros. So the questionnaire, in effect, compares your investment practices to those of the masters -- as the chart above graphically displays.

The first section lists your major strengths and weaknesses; and the final section makes recommendations that, if you follow them, should result in improved investment performance.

To Summarize:

By and large, you are getting the investment results you desire
You have some of the strengths of highly successful investors -- but several weaknesses that are holding you back
Investing is often a source of anxiety for you. If you follow the recommendations listed in the final section you should be able to reduce that anxiety considerably

Your Investment Strengths
You make your investment decisions independently

The successful investor generates his own investment ideas based on his own research. Furthermore, he restricts his investing activities to what he knows and understands. The result: he makes his decisions based on FACTS that are personally known to and understood by him.

The investor who bases his investment decisions on something he reads in the newspaper, the opinions of friends, follows some tip from his broker or another investment adviser can never be wholly sure that he's doing the right thing.

By coming to your investment decisions independently, you are following in the footsteps of the Master Investor. This does not mean you should not get ideas from other people. There are always more sources of investment ideas than you could possibly develop entirely on your own. What is important is that you do your own, independent research and evaluation before making a decision to invest regardless of where the initial impetus originally came from.

Since you're following this practice, you've probably already realized that 'good' investment ideas that everybody else knows about aren't really much good at all.

You take a long-term view
Like the Master Investor, you seem to be taking a long-term view, and have realized that the key to being a successful investor is to maximize the annual rate at which your capital compounds.

Taxes and other transactions costs have a direct impact on your ultimate return. By minimizing such costs, as you appear to have done, you can increase the 'magic of compound interest' by several percent per year without making a single investment decision.

Like every other aspect of the investment process, the arrangements you have made should be reviewed periodically. Continued competition in the brokerage industry, for example, may result in lower commissions becoming available.

Taxes are usually the greatest cost of all and tax laws are continually changing. And as your wealth grows, you may find more opportunities to reduce or defer the amount of tax you have to pay. And the less tax you pay, the more money you have to compound.

You are clear about your investment goals
The Master Investor's primary focus is the process of investment. The profits he expects to make, while very important, are actually secondary. A major secret of his success is that he enjoys the hunt, the process of discovering new investment opportunities that meet his criteria.

Investment profits are a means to some other goal, not an end in themselves. So perhaps like Warren Buffett, for you investing is just plain fun. Or maybe your primary goals are security or independence, or similar objectives that your investing helps you achieve. Paradoxically, once you have discovered them -- if you have not already -- your investing will make you more money when profits are no longer your primary aim.


Needs Some Improvement
You can learn more from your mistakes

One of the most important habits the Master Investor follows religiously is that whenever he makes a mistake he goes over everything he did, how he came to his decision, how he executed it, whether he monitored his investment properly and so on to find out what he did wrong...so he won't do it again.

Occasionally he might be unable to uncover any evidence that suggests he did not follow all his rules. If this happens, he will try and figure out if there's been some change in the market that means his investment approach is no longer working, or needs to be modified in some way. Or looks into himself to see if, perhaps, he has changed in some way that he had failed to recognize. Or he may realize that he's been under stress and should take some action to minimize that.

It appears that much of the time -- but not all the time -- you have a similar attitude towards learning from your mistakes.

Most people prefer not to dwell on their mistakes and so are fated to repeat them.

Not you. But it will pay you to analyze your mistakes more rigorously and consistently than you have in the past. The result will be to turn your mistakes into learning experiences.

For example, set aside a fixed time once a week (or if you are a day trader, perhaps once a day) to review any mistakes you may have made, no matter how small they appear to be. Being willing to be self-critical is a powerful practice that will enable you to continuously refine your method of investing.

Your strategy for finding an investment that meet your criteria needs to be refined

For too many investors, the most important actions are the buying and selling of an investment. The reality is quite different: the Master Investor spends the majority of his time looking for investments that meet his criteria. Buying and selling are actions that take but moments.

The Master Investor has, of course, clarified his investment criteria so he knows exactly what kind of investment he's looking for. So if you have not fully developed your investment criteria, you will find that writing them down will help you refine them.

It's a tautology, but it's worth emphasizing: only if you have defined your investment criteria can you develop a search strategy to find investments that meet them.

You are following in the footsteps of the Master Investor in at least one crucial respect: that you are evaluating the investments you make on your own. But it seems that you have not developed a fully-fledged search strategy, suggesting that you need to refine your investment criteria.

The act of defining them often makes the search process obvious. In the process you'll probably discover that by doing more extensive and rigorous research you'll make better -- and more profitable -- investment decisions.

Your Investment Weaknesses

You have great difficulty 'pulling the trigger'

When the Master Investor has made a decision to buy and sell, he acts immediately. The process of phoning his broker has much emotional significance to him as when you phone a restaurant to make a dinner reservation.

When you have made an investment decision, however, you usually have difficulty 'pulling the trigger.'

There have probably been occasions when you've identified an opportunity but missed it -- because the price zoomed while you hesitated. Or agonized over when to take a profit. And, perhaps you were too tentative: buying only a small amount when you 'knew' you should buy more.

When this happens, it is an indication that you are not always sure about what you are doing. And the chances are that, overall, you are probably disappointed with your investment results.

The reason the Master Investor has no problem 'pulling the trigger' is that he has a deep understanding of the investments he is making.

So the most likely cause of your tendency to procrastinate is that you have not clearly defined your investment criteria or established a complete investment system. You'll find more about this and other suggested steps you could take to improve your investment results below.

You lack a consistent investment focus

It seems evident from your answers that you are not clear about the kinds of investments that work for you -- and those that don't.

The Master Investor has clearly defined his 'circle of competence.' This means that he has drawn, so to speak, a circle in the sand. Within that circle are the investments and investment methods he understands. Outside that circle are investment categories he knows little or nothing about.

The Master Investor's edge, his 'competitive advantage,' comes from being crystal clear about where that line is drawn; and making investments only within his circle. As a result, he will only buy an investment he understands. And he makes a point of learning as much as possible about the kinds of investments within his circle of competence.

In other words, he specializes. Even investment 'whales' like Warren Buffett and George Soros occupy a tiny niche in the multi-trillion dollar investment marketplace.

By the same token, investments that are not in his circle of competence simply do not interest him. He just ignores them.

You have yet to make this distinction.

It's crucial to define your circle of competence as that's the only way you can consistently find investments which are, in Warren Buffett's words, 'high probability events.' This means: investments with the prospect of a substantial profit and a small to negligible risk of loss.

And to emulate the Master Investor, it's imperative that you avoid entirely investments you do not understand, no matter how appealing they may seem. Quite probably, if you think about it, you will realize that this has been a major cause of past investment losses.

To improve your investment results, it's essential that you define your circle of competence and clarify your investment criteria; and there are some suggestions you are urged to consider in the last section.

You don't have an exit strategy

The Master Investor has developed a very clear exit strategy. Before he even buys an investment, he knows exactly what would cause him to sell it. His rules for selling grow directly from his reasons for buying. In other words: from his investment criteria.

From your responses to the questionnaire it is evident that taking profits (or cutting losses) can be a source of great stress and anxiety for you. The probable cause is that you have not clarified your investment criteria.

Without proper investment criteria, it's simply impossible to have a fully-developed exit strategy. To put it another way: if you don't know why you are buying an investment, how can you know when to sell it.

As suggested above, it's essential that you first define your circle of competence and clarify your investment criteria and only then will you be in the position to create a fully-developed exit strategy.

Recommendations

It appears that, by and large, you are getting the investment results you desire.

Even so, there is always some aspect of your investment approach that can be improved, especially if you developed it by trial and error.

By going through the following exercises and using them as a gauge to judge your current practices you're bound to find something that can be further refined.

1. Check the clarity of your investment goals

A driving force behind the Master Investor's success is his investment goals. And he is, of course, very clear about what they are.

So it's important that you are also very clear about yours. Even if you feel that you have that clarity, it pays to review them from time to time. Simply ask yourself: WHY are you investing, what's your purpose?

Paradoxical as it may seem, your purpose in investing is NOT to make money. Making money is the means to your ultimate goal. For example, your goal might be security. If it is, then losing money will jeopardize its achievement.

If profit is your only investment objective, you'll find -- strange as it may seem -- that those profits will improve when you discover and focus on your underlying 'higher' goal.

2. Refine your investment focus

The successful investor specializes. He clearly defines his circle of competence and stays there. He doesn't go venturing into unknown territory. The Master Investor goes one step further: he occupies a tiny niche and learns everything there is to know about it.

For success, it's essential that you have a similarly narrow focus. One way to improve your investment results is to refine your 'circle of competence.'

Simply ask yourself the following questions:

What am I interested in? What class of investments and what aspects of investing fascinate me?
What do I know now?
What would I like to know and be willing to learn?
This will help you 'draw the line' (if you have not already done so) between what you know (or are willing to learn) and what you don't know.

Finally, by only making investments inside your circle of competence, you will follow the Master Investor in only investing in what you understand.

And as markets change -- and as you change -- it's worth revisiting these questions once a year or so to keep yourself on track; and to see if there are any changes you need to make.

3. Refine your investment criteria

Your investment criteria are all the reasons that go into your decision to purchase an individual investment.

Here are two processes that can help to both refine your investment criteria and pinpoint any weaknesses in your investment methodology:

1. Go through your past investments and separate them into two 'piles,' the winners and the losers. For each category, analyze why you lost money or why you made a profit. What did you do differently? For the winners, what did you do that was the same? Answering these questions should lead you to focus on what, in the past, you've done RIGHT.

2. Go back over previous investments and write down all the reasons why you bought them. Whenever you make a new investment, again, write your reasons down so that you can refer to them easily in the future. At the same time -- that is, BEFORE you make the investment -- write down exactly what factors would cause you to take either a profit or a loss.

The successful investor is ruthless when it comes to taking losses -- and one reason is that he knows before he buys exactly what factors would cause him to sell.

This process effectively forces you to hone your criteria, and will also help make your own thinking processes clearer to you.

Keeping written records of your reasons for making each of your investments will help you continually refine and improve your investment methodology.

4. Is your investment system complete?

It's always worth checking that you have covered all the bases of a complete investment system, and that you have clearly-developed rules for each of...

what to buy
when to buy it
what price to pay
how to buy it (these first four depend, in turn, on having very clear investment criteria)
what percentage of your portfolio to invest (money management and position sizing)
monitoring
when to sell (including when to take a loss)
rules covering the use of leverage (including whether to use it)
'Hunting': how to go about finding new investments that meet your criteria (and what to do when you can't)
how to protect your portfolio against infrequent but potentially devastating events
how to handle mistakes and
what to do when you don't know what to do -- when the system seems to have stopped working.
By comparing your existing method with this checklist, you'll find what might be missing. Correcting that omission, even if there's just one, could make all the difference in the world.

An element that is often overlooked is the process of monitoring: regularly comparing the current state of an investment with your original criteria for both buying and selling it. When your criteria are crystal clear, whether you should take a profit or a loss will 'jump out' at you.

And writing down all reasons you are making an investment -- and keeping those notes -- serves as a handy reference for the monitoring process.

If your thinking was comprehensive, then the process of monitoring will tell you immediately when it is time to take either a profit or a loss. If your thinking was incomplete, monitoring will reveal that too, enabling you to improve the clarity of your investment thinking. When followed, this process results in fewer, smaller losses and bigger profits.

And it's worth stressing again that one of the Master Investor's most powerful tools is his attitude to mistakes: he treats them as learning experiences.

As a result, he is continually refining his method of investing, and rarely repeats a mistake.

Following his example can only improve your investment results.

天地

jamesmith

天地 发表于 2013-2-11 12:51 PM

Happy new Year! big hug!

silicon_beaver

need registration.  

jamesmith

silicon_beaver 发表于 2013-2-12 01:22 AM
need registration.

it's free, and registration is pretty quick