Who is a PreparedInvestor?

I have heard many times people say "He was lucky. He was at the right place at the right time". It may not always be luck, many times it could be that he was prepared and he knew where he had to be in order to benefit. He could have been a PreparedInvestor. For those mathematically inclined, Luck is a function of preparedness and opportunity.

Luck = Preparedness + Opportunity

You should be prepared to make use of the opportunity and that is when you maximize your returns. That is when you become a PreparedInvestor. That is when "Stock Market favors the PreparedInvestor".

Preparation is the key. With respect to stock market investing, being aware of the current economics, being informed of industries that are in favor and those that are out of favor, can make a difference in your investment returns. A PreparedInvestor needs to constantly apprise himself of the factors that can affect the stock markets and be ready take action when the time is ripe.

With that insight, we can say that a PreparedInvestor is the one who:

1. Collects the relevant facts and data
2. Understands what each data set implies
3. Determines in advance what are the possibilities
4. Determines in advance what are the probabilities for each possibility
5. Determines in advance the possible action for each possibility (at least for the most probable possibilities)

When an investor is prepared, he can recognize consistent characteristics of the economic cycle and he can identify the industry sectors that are benefitting or about to by the prevailing economic status. If the investor can now envision a portfolio strategy that can take advantage of these situations, then his chances of success increases immensely. That is, the investor can avoid portfolio downturn during Recession and reap windfall profits during stock market expansion.

In a competitive market like today's where there are many professionals in the game, opportunity goes to the investor who waits for it, who recognizes it, and acts quickly when the opportunity presents itself. That is when you have graduated to the PreparedInvestor level.

In the future postings, I would like to focus on the economic factors that can assist us in making better judgements on the economy and hence on the stock market. Once the general stock market is on an uptrend, we can then find the sectors that are poised to take advantage. Maybe then the "opportunity" can help you zero in on a stock that will be sky-rocketing!

-Nidhi