Developing the Rich Investor Mindset

Do you want to be rich?

Many people would say, "Well, I'd rather be rich than be poor." And, of course, there are those who reply, "You know, money isn't everything. And I'd rather be happy than rich."
I could never understand why certain people think that you must be either happy or rich at the expense of the other. I guess the real question you must ask yourself is: "Can't I have both money and happiness?"

Personally I don't think that the Rich Investor Mindset is "Magic Formula", it is something that you must find inside yourself -- Specifically in how you think -- and your mindset. How and what you think, what you say to yourself, how you react to circumstances, and what you aspire to will directly affect what you receive in life. Basically if you say, "I can't do that." then you can't do that. If you are afraid of even making a mistake that you avoid the new and unknown then you don't learn or grow. Yet if your words are, "I can!" "I will!"- in other words, if you say "Yes" more often than "No"- and you look at the new and unknown as an adventure and an opportunity to learn, then your chances for success increase dramatically.

"All that a (wo)man acheives and all that he/she fails to achieve is a direct result of his/her own thoughts." - As A Man Thinketh, by James Allen

Adopting a mindset that produces what you truly want in life versus one that leaves you struggling is definately a willingness to improve yourself.

According to a book called Mindset:

There are 2 types of mindsets. The first is the Fixed mindsets. People with a fixed mindset believe that a person is born with a certain amount of intelligence and that amount does not change. His/Herpersonality, talents, strengths and weaknesses remain constant throughout her life. He/She may learn new things but his/her intelligence does not grow.

The second mindset is called Growth mindset. These people believe that your intelligence, abilities, aptitude and character can constantly change and improve through learning and experience.
Here is the key: Because the fixed mindset person has a set amount of intelligence they spend their whole life proving how smart they are. These are the people who flaunt there degrees and titles. They know all the anwers. They constantly seek out validation. And because of this they cannot make a mistake. They cannot fail. For if they did, that failure would jepardize their very existence. They think, "If I make a mistake or fail then I'm not as smart or talented as I portray myself to be." They seek out the unknown. They do not take chances because, God forbid, they might fail. These are definately the entreprenuers of the world.

The growth mindset people, on the other hand, welcome challenges. They want to tackle the unknown. They opt for the more difficult problems. They have a passion for learning and for growing. They want to constantly stretch themselves because thats how they get better.

Have you ever heard someone say (or maybe even you said this), I'm not good with money." Or "My eyes glaze over when I think about investing." How about this one: "Investing is too difficult. My mind doesn't think that way." Or this: "I started investing but I'm bored with it." Those thoughts are all coming from a fixed mindset. The growth mindset would say, "I don't know much about investing today but i can learn it and apply it and probably become a great investor."

So if you have a fixed mindset, how do you adopt a growth mindset? I've found that the first and easiest step is to simply be aware of the two mindsets. If you listen to your words and watch how you react to situations you'll begin to recognize when you're in a growth or a fixed mindset. What you say to your kids is another sure giveaway.

When it comes to investing, if you stay in a fixed mindset I believe that your chances for success are slim. I see people freeze up when I guarantee them that they will make mistakes with their investments. It's part of the process. But if you're in a mindset where mistakes threaten your very existence then what I'll hear are all the reasons why investing wont work. In investing sometimes you win and sometimes you lose, but you always come away smarter and better prepared for my next investing. Making mistakes, learning from them, and getting smarter are all part of the investment process and, as you can see, are ideally suited for the growth mindset.

Don't Underestimate The Power of the Moving Average.

Whether you are investing or trading, the moving averages can help you pick the right stocks to get into at the right time. Whether you are looking at the Overall market, a particular industry or sector, or the individual stock itself, the MA can help determine the overall direction of where the a stock will go. Typically a professional trader typically will use four different MAs. On a daily chart, I use these MAs:

1. 13 EMA
2. 20 SMA
3. 50 SMA
4. 200 SMA

EMA stands for Exponential Moving Average, and SMA stands for Simple Moving Average.

Now depending on which way the general market is going, determines if i am going long or short.

For shorting stock in a bear market, the ideal MA pattern is as follows:

Downtrending 200 SMA > Downtrending 50 SMA > Downtrending 20 SMA > Downtrending 13 EMA > downtrending stock itself.

For going long on stock in bull market, the ideal MA pattern is as follows:

Uptrending stock itself > Uptrending 13 EMA > Uptrending 20 SMA > Uptrending 50 SMA > Uptrending 200 SMA

this technical analysis indicator is best used when the market, sector and individual stock compliment each other.

The formula for getting rich.

There is a simple formula for getting rich. But first you need to know the three kinds of income. The first is earned income, which is monthly cashflow from a job from your investments. the second type of income is portfolio income which is from stocks, bonds, mutual funds, etc. This is in the form of capital gains. The third and final type of income is passive income which is the income you receive from rental properies, covered calls, royalties, etc.

How you get rich through this process takes a lot of education, but this is the quickest way to become financially free.

First you need a good professional education, preferrably a degree from a college. Keep in mind the cost of going to a college, because you don't want an enormous amount of college debt. I have a friend who will graduate with school loans the size of a home mortgage. Try to get out of college with as little school loans as possible.
With the Cashflow (total income minus total expenes) you receive from this job you will should put your money in a stock trading account. Make sure you take a course or two on how to trade stocks. Trust me, it will greatly decrease the risk you take on, as well as maximize your capital gains. Done properly trading can multiply your money extremely quickly. I know people who have turned $30,000 into $150,000 in about a year.
With the capital gains you receive from trading stocks, you will then invest in things that can give you passive income such as real estate investments, and covered calls.
With your job continuing to put money in this triad of wealth builders, you should become wealthy in no time, as long as you have th discipline of cashflow management.

Recommended Trading Books

Here are a few books that I would recommend people read if they are interested in learning how to trade:

A Beginner's Guide to Day Trading Online, By Toni Turner
A Beginner's Guide to Short Term Trading, By Toni Turner
Short Term Trading in the NEW Stock Market, By Toni Turner