Do you prefer a roller coaster or a carousel? This seems an unlikely question to be asked in an article about managing finances, but let’s consider it a bit further. Do not worry, we will come back and tie it in to financial investing in a short while.

Both a roller coaster and carousel provide the same basic concept… provide an enjoyable ride for those who choose to get onboard.  One is predictable and steady, relaxed pace and still enjoyable… delivering a pleasant experience and fulfilling its purpose for those who ride it. The other can be exhilarating, bringing forth strong emotions ranging from joy from an adrenaline rush to fear about what comes next. There are unexpected turns, it goes up and down sharply, and sometimes it seems as if the bottom may just fall out. It is important to know which ride you prefer for your personality and for both rides it is important to get on and off at the right times. (For a literal example here, I suggest when the ride stops moving.)

We have a similar choice to make as investors while we manage the money and other resources that God has provided to us. We have to decide where to invest… in bank accounts paying sometimes low interest or in stock markets… how much in each if we properly diversify to match our specific investing goals? For the money we invest in stock markets, are we investing in a long-term horizon of several years and satisfied with low risk and perhaps lower returns? or are we trying to trade in and out of stocks on a short-term horizon to embellish our returns?

For most of us, we would be well served to invest for longer term based on market and specific business fundamentals. That is a bit more like the carousel. Yes, it is important to know when to get in and when to get out, but you can sit back patiently and try to enjoy the ride… hopefully collecting dividends along the way.

For those who decide to trade… “please hold onto the bar”. The market may make sudden and inexplicable moves that you do not anticipate. It can be a real rush and it can be frightening. You must be disciplined and specific about your goals… about why you trade in a particular stock and re-evaluate your thesis if the situation changes. You must avoid the emotions of holding onto a losing position hoping it will become a winning one, but also avoid just getting out at the first sign of trouble. Many who are not ready for this step, and many even professionals who think they are, end up selling low when fear kicks in and buying higher when everything seems to be going well. This is most certainly not the strategy anyone would devise ahead of time… buy high, sell low.

The moral of the story… understand which ride is better suited for your personality… and with what percentage of your diversified portfolio. If you want to invest or trade… do your homework and set up specific investing or trading theses, or why you are getting in and why you would get out of a particular investment. What would change your mind? If you choose frequent trading… please hold on to the bar and try to calm your emotions… or you may just try to get off the ride at the bottom, while it is still moving.

—-

Remember that all you have belongs to God. Manage your money God’s way. Visit GrowGodsMoney.org .