Herding...the mentality of many

1) The mentality of an investor 

First of all, I think the mentality of an investor is the utmost important ...: 

Over the time I had discovered that many successful investors like Warren Buffet, George Soros, Jim Rogers, Peter Lynch, Benjamin Graham, John Templeton, Mark Morbius, and many more, they all have something in common. They all are very dedicated in their jobs...which is investment although varies in strategies and approaches, however they all show high level of commitment and dedication as well as discipline. 

This has something to do with their belief system (BS) and their core value system. Over the time, they had successfully developed a working system and stick to their strategies and earned massive profits in the stocks market.

This is indeed something we had to learn from the gurus before we becoming as successful as they are.   

As such, one mentality which we should avoid the most is about herding. It is a basic instincts in our nature to ensure our own survivals...For a long time, scientists think that the mimicking behavior of animals is somewhat irrational and extraordinarily..."stupid"! It is as though the animals fail to respond on their own and go to following the herds even when the herds are falling over the edge! 

  I am not kidding...the herds in goats, zebras, elephants and other animals apply the same kind of herding to ensure the survival of their species...humans too. The one reason why they react in such a way is...to gain security and staying in the comfort zone.. 

  Another thing why herding is hard to avoid is that...it has become a conditioning... A term you find out very familiar in psychology...since small, we have been taught to follow the crowd to avoid embarrassment, humiliation and so that we are exactly like anybody else...normal. We follow some celebrities from half of the other globe and try our hardest effort in learning the same fashion, styles, languages and even learning behavior. Therefore, we react by mimicking others to get the "safe" and "secure" results. 

   But, in investment, most of the time, following others is not a rational way of making a good deal, not to mention a profit-earning ones. Herding in investment normally pointing to chasing a "hot stocks" even though the prices already sky high ! And...in the market, the stocks normally reach the highest points before starting to tumble down ....crash and burn...That's the most obvious reason why a lot of people suffer huge losses no matter who brilliant they are. 
     Therefore, to avoid this, we must re-condition our behavior by reversing our fear and greed. Yes, these two emotions are the basic emotions which control the market as well as ourselves. Like Warren Buffet always say "Feel greed when everyone else is in fear and feel fear when everyone else is in greed. " This is a very interesting video which I found very fascinating in describing fear and greed in herding behavior. 

The Beginning - Passive Income Creation

The Beginning - Passive Income Creation

 It all started back when I was 19 years old....I came across a book that struck my attention and got fixed to it for many years...it was one of the many books written by a famous investment Gurus- Robert T. Kiyosaki. 

I was intrigued by the idea of creating the passive incomes through many ways....real estate, stocks investment, business, or any other investment in paper products (options, futures, commodities, currencies, bonds etc...)

         The latest one is ...internet marketing....I am of no investment guru or so...yet I strongly believe I have come to the correct path after all....

         Hereby, I would like to shares some of my mistakes (actually many of them) so that you would not make the same mistakes as I did...and maybe you can share yours so as I can excel better....

                                                                      By, Raymondlcm 21Nov2012

Back in those years...about 5-6 years ago....I was in the game (the rat race game by Robert T. Kiyosaki) and well-understood that by keeping my expenses at incredibly low then I can save some money to started learning investing and with some minimum passive income I can lift myself up and out of the rat race most people are still trapping in...Although many years had past by, I hadn't thrived in making sufficient passive income to do so...Therefore, my question will be: 

1) Which is the utmost important thing, earning the passive income first or create your wealth first then start investing ? 

(Most of the time I get the answer is to making them both...)

Whatever your answer is, please take note of the groups your are in now...and try make it into the "I" group which stands for investment...IF you have no idea what I am talking about, please refer to the below chart...

The idea is simple : 

The CASHFLOW Quadrant is divided into four types of people.

E is for Employee

S is for Self-Employed or Specialist

B is for Big Business

I is for Investor

On the left side of the quadrant are Es and Ss. They pay the most in taxes and trade their time for money.

On the right side of the quadrant are Bs and Is. They pay the least in taxes and create or invest in assets that produce cash flow for them even when they’re sleeping.

It’s my belief that the dividing line between those who are struggling in today’s economy and those who are prospering is the line between the two sides of the CASHFLOW Quadrant.

In this downturn, it is employees and self-employed people who are struggling as jobs are scarce and the cost of living is rising. Because they have only their time to trade, and that is not in high demand, they are at a disadvantage. Additionally, the products they need in order to live like food, gas, and more are becoming more expensive.

On the other hand, those who own big businesses and who invest are becoming richer and richer. Corporations are sitting on piles of cash and investors are cherry picking the best assets at rock bottom pricing.

Many in the E and S quadrants are holding on for the economy to pick up, and if it does, they will do well as the demand for people’s time—employment—goes up. That being said, the will still pay the highest in taxes and still be under the mercy of their employers and the economy. Until then, they will struggle because they have nothing else to offer and no other way to make money. Employees and self-employed always do badly in a down economy.

Those in the B and I quadrants, however, are doing well and taking advantage of the downturn to get richer. And if the economy picks up, they’ll also do well as the assets they’re investing now will pay dividends at the lowest tax rates—sometimes zero—in the up market, all while retaining control over their money and investments. Unlike, Es and Ss, Big business and investors can do well in both down and up markets.

If you’re struggling in this downturn, I encourage you to begin changing your mindset. Start making plans and taking action to move from the left side of the CASHFLOW Quadrant to the right side. Invest in your financial education, begin a side business, or start investing for cash flow.

Start small and move onto bigger things, but have a goal to become a B or I. It won’t happen overnight, and it will be hard work. But if you’re diligent, plan well, and execute your plan, you’ll be much better off in the future whether the markets are up or down.

The above statement is quoted from the website rich dad poor dad to enhance people's knowledge of the cashflow quadrant. No offenses means..

Please check the link : 

http://www.richdad.com

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