What’s the difference between a successful investor and a failed investor? It’s not being able to always pick the winners to invest in, even though that comes in a close second. Having that ability would be nice, however, even that would not always guarantee success as an investor. No, success as an investor really depends on how well you’re able to manage your money. As a matter of fact, success in any financial endeavor really and truly depends on how well you can manage your money.
Managing your money well spells success not just as an investor, but life in general. Now you may be asking yourself what does managing money have to do with insurance. Well, managing your money is related to insurance because managing your money shows how well you are able to manage risk. Insurance is all about managing risk, and how successfully you are able to do that determines how well you are able to do financially.
I got to thinking about this relationship while reading Bennet A. McDowell’s A Trader’s Money Management System: How To Ensure Profit and Avoid the Risk of Ruin.
McDowell relates his successful approach to staying out of trouble in the financial markets and maximizing profits. In this book, he mentions insights into:
- The psychology of risk control as well as the finer aspects of setting stop-loss exits
- The value of managing trade size and consistent record keeping
- The process of putting together your own personal money management system
According to McDowell, the great majority of trader’s fail to appropriately manage risk. It becomes the last thing these traders focus on, an according to McDowell, this lack of focus becomes one of the barriers to their success as traders.
Taking his methods a step further, I believe that the approach McDowell writes about in his book can be applied to life in general, and become the basis for approaching almost everything else that we do. By always keeping in mind how we manage risk, we learn to manage our finances in a safer manner. This approach allows us to think about what we wish to accomplish every time we undertake an activity, not just investing. Anyway, it’s an interesting read, especially if you are also interested in learning additional investment strategies for the financial market.
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