Stock market commentary, analysis, insight and opinion of the RightLine Editors is available every Tuesday/Thursday evening & Saturday
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October 27, 2020 - The RightLine Report
Notes From The Editor
There are a number of reasons most people don't trade stocks. One of the most common is the feeling that they just aren't smart enough. After all, folks that trade stocks are smart folks ... right? Well, I guess it depends on how you define the word "smart."
Yahoo writer Laura Rowley says that that people with high IQs, while generally better paid, aren't likely to become millionaires. One study reveals that smart people tend to make bad financial decisions just like folks with lower intelligence scores. In other words, smart people can have thick skulls when it comes to accumulating wealth, while the average person next door has a better chance of becoming a millionaire.
Researcher Jay Zagorsky confirmed this theory when he studied the relationship between IQ and wealth. The Ohio State University scientist found that although smarter people are likely to be paid more for the work they do, but there's no relationship between intelligence and net worth. So what's the common dominator? What are the personality traits that can lead to big bucks?
First, it seems that people who accumulate wealth tend to play by their own rules. They often don't do well in school because it's too structured for them. However they are very creative. They understand how things work, and how to get things done.
It also appears that wealth builders are willing to take more risks. Consequently they tend reap more rewards. The average person with an average brain may be a bit more naive and willing to jump in than their high-IQ friends. They don't brood over every angle and think too much about the potential downside of a venture. They're not afraid to learn skills as they go along, and they don't give up when things get tough.
Some things can only be learned by doing them. Trading is one of those things. You can paper trade all you want, and it's not a bad idea to do that when you're first getting started in the market. However, everything changes when you put real money on the table.
It's like watching a "How To Swim" video versus actually getting in the water. There are some things you need to know before diving in, but you only learn to swim when you get wet. Start in the shallow end of the pool. Buy small amounts of shares until you have gained confidence in your abilities, and then ramp up your positions within the boundaries of your personal risk calculations. Before you know it your wealth IQ will be out the roof.
- Thomas Sutton, Editor
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