Everyone has seen how stock charts look like. But have you seen the chart for your investment capital – how your capital rise and fall with time? The way your investment capital moves depend on the type of investor. I have heavily generalised 3 kinds of charts for the Buy-and-Hold investor, Trader and the Clueless investor. This is important because all of us would always monitor our capital time to time to see if it has grown. By doing this, we subject our happiness to it’s rise and dejection to it’s fall. And whether we still have the tenacity to continue investing when we feel dejected. The end point maybe the same, but the journey can be very different. Find out which of the capital movement chart you prefer and you can find out the type of investor best suits you. The Buy-and-Hold Investor

As a Buy-and-Hold (BAH) investor, you expect your capital rises gradually with time. It is akin to watching grass grow. You probably would not see the effect within a year. You must have the patience to hold on and it is possible to see your friends reaping higher gains than you. At some point you will feel that you may have made a wrong choice. But over several years, you begin to notice the gains. And since you are a BAH investor, you will participate in every rise and fall of the market. When the market crashes big once in 7-10 years, your investment goes down with it. Seeing your capital dropped 50% is heartbreaking, especially when you see the gains which took 5-6 years to grow vanish within days. But it does not deplete all your profits, you actually end up better off than you started. Of course this will depend on when you enter the market. If you keep holding on, you will participate in the next cycle of bull run and bring your capital to higher heights. Hence, the greatest challenge for the BAH investor is patience, and you must be able to take the hit when market plunge. The moment you cash in after the market crash, the game is over. Read more...