INVESTMENT MANAGEMENT AND INVESTOR PREPARATION

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At this stage we expect that the investor has done the preliminary preparation to undertake his investment management exercise.

1. The investor realizes that he is on his own. We are our own boss, and are both the employer and the employee. In a matter of speaking we are reporting to ourselves. If the sequence of steps and actions we implement is correct we are justly rewarded and if they are wrong we are punished.

This is to bring to your attention that, we cannot indulge in a blame game. Of course, there are no free lunch tickets. If an error is observed it must be corrected immediately.

2. Are we up to the challenge? It is advisable to do a SWOT analysis on ourselves and our present circumstances. We are to consider whether we:

# are secure in our present circumstances.
# have the frame of mind to take on risk and wait long enough to achieve profitable returns.
# have gained an understanding of investment management and the processes involved.
# have a documented plan of action available.
# have done a “what if” analysis to know in advance what we would do given the various circumstances and situations the equity and other allied markets would put us through.

3. Do we have the commensurate resources available? Given our present secure circumstances, we should have commensurate personal free reserves available to start the investment management exercise to develop a profitable portfolio of stocks and other financial instruments.

4. Have we a good association with a trustworthy market intermediary (broker)? As individual investors we cannot deal directly in the equity and other markets. We would have to take a broker alongside.

The selection of the broker is of importance. We must realize that a brokerage is a business entity in itself; and profits from the brokerage that we investors pay them to execute our transactions on the trading floor of the exchange. In fact some banks (like in India) have developed fully functional brokerage arms.

We as investors have a choice, and there is nothing personal or emotional about the selection of this broker we would be dealing through. We must always go for the best (optimal) deal available.

5. Have we prepared a project report? The investor must prepare a project report, and may avail the services of a consultant to do so. The individual investor must also do periodic reviews to ensure that the integrity of the objective is maintained in all his transactions. Any deviation from the objective must be corrected. However, in certain circumstances we may consider modifying the objective to include the deviant action as it may have proved profitable over a period of time.

Using the brief list above as a guide, the investor may use his or her own initiative to increase this list of things to do for their preparation.

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