Your biggest asset is your financial comfort zone.
Find out how a calculated mix of caution and ambition can help you reach your goals in a relaxed way.
A warm hello to all new readers! I’m glad you are on board.
New here? I’m Michael and on a mission to make beating the stock market as easy for you as choosing your favorite ice cream. I write an algorithm that does exactly that.
Read the full story here.
A good night's sleep is underrated
Even the wise of all say you should only invest what you are bold enough to lose. That’s a golden rule ringing with wisdom yet leaving us questioning ourselves most often,
“How do I decide that amount?”
Let’s demystify this puzzle while balancing the scales of ambition and caution in our mindset.
Here is what I did.
Step 1: The Reality Check – Write down what you have
Well, first things first, let’s lay out all the cards on the table. It’s time for an honest look at what you own.
We’re talking about your tangible assets:
House
Flat
Cash
Cars
Boats
Baseball Cards
Stamp Collections
And the list goes on
Gather up those figures now and add ‘em together.
The result?
It represents, if you will, a snapshot, a financial selfie of the status of your current assets.
Step 2: Meeting the Other Side - Owning Up to Your Debts
Now take a deep breath and shift to the less glamorous side - your debts.
House Mortgage
Credit Card Debt
Car leasing
Total these up.
This number is not just any figure; it’s actually a reminding you of your commitments.
Step 3: The Grand Reveal – Calculating True Worth.
Now is the litmus test.
You will subtract your total debt from your total assets, and voila. The result is an embodiment of your financial backbone, the real wealth you command.
Step 4: The Stress Test – Imagining the Worst
Now, imagine the fact that every single penny disappears overnight.
Would this shatter your world and leave you either bankrupted or in a tough state of meeting basic needs? If your answer is more than simply ‘yes’, we have hit an important threshold.
That number is too high for comfort, right?
Step 5: The Comfort Calibration – Slicing Until It Feels Right
Ease up a little bit. Divide that scary number in half. Are you feeling better yet? Divide it in half again. Do this as many times as necessary until you reach a number that you wouldn’t really be affected too much, even with the loss or theft.
This is your ‘I won’t lose any sleep over it’ - the perfect, peaceful number.
Step 6: Stock Market Investments
Now, think about what if you have invested that “peaceful” amount into one stock. Risk is certain. Losing everything will not be just suck; it will be something probable.
Step 7: The Safety Net
Time to outsmart risk.
Spread your investment to different stocks. As you grow in number, the risk of losing everything diminishes significantly. This strategy is not just smart; it is what investors call “diversification.”
Remember that real diversification is not just about spreading risk within an asset class, it’s only achieved when you include other asset classes.
Step 8: The Wise Investor - Balancing Risk with Ambition
Congratulations!
You have now identified an amount that you can afford to invest without losing a glitter of sleep, cushioned by the safety of diversification.
Now, you’re playing the investment game with a cool head.
Polish this approach as you wish, and always keep diversification as your safety net.
Now you have changed from anxious savers to confident investors.
Remember, it's not about putting your excess money in a drawer, it's about knowing what your financial backyard looks like, assessing the risks, and making decisions that suit your well-being.
Welcome to stress-free investing!
If you think somebody should read this, share it, and make them happy.
Progress
This week was chaotic and challenging.
My wife had a slipped disc, which resulted in a marathon of visits to the doctor. Meanwhile, my own neck decided to join the rebellion, protesting my endless hours hunched over my desk.
But that's not all—my code decided to throw a stone as well, hiding a (little) bug yet crafty enough to demand three intensive days of detective work.
Frustrating? Absolutely. But I found it in the end and that’s all that matters!
Despite the unexpected surprise, I will continue my commitment to quality. Although all my tests after the fix have been successful, I am still running the training for my algorithm again to be 100% certain. It's not my style to cut corners - it's not just unwise, it would be downright unprofessional.
Plan
This week, I'm bouncing back, ready to tackle my To-Do list with a smile again. 😊
What's on My Mind
A realization in all this chaos—I need to include stretching as a daily ritual. It's time to show some love to these muscles and ensure that my body doesn't join the rebellion again!
Nuggets I’ve enjoyed
Have a great day StockStar!
Hit that heart if it’s also not your style to cut corners!
Michael
Recommend The Economy Rocket to your readers and friends
I share my stock investment story without sugarcoating – you get the good, the bad, and those tricky ego trips. I'm developing a service with a mix of smart code and proven investment strategies, making stock analysis a thing of the past if you wish. Because life offers so much more beyond the confines of stock analysis.
Disclaimer:
The information in this article is my personal opinion. I’m not a certified investment professional. It is not consulting, nor does it constitute investment recommendations.
I do my research carefully and follow my personal investment strategy.
The stock market is a complex building with its own rules. There are no rules set in stone, like the rules of physics.
Therefore, use the contents of this newsletter at your own risk and do your own research as well. Investing in the stock market can lead to a total loss of the capital invested.
Truly wise!!!