introduction to investment environment

INTRODUCTION

TO INVESTMENT ENVIRONMENT

Introduction
This information is very timely because the current investment environment magnifies our psychological biases. Several powerful forces have affected investors recently. First, a strong and extended economy has created the disposable income for millions of new investors to enter the investment world. Most of these new investors have little or no formal education in finance. Second, this economy has spurred one of the longest and strongest bull markets in history. These new investors could have mistakenly attributed their high investment returns to their own capabilities instead of being a consequence of investing during a bull market. Finally, the rise of the Internet has led to increased investor participation in the investment process, allowing investors to trade, research, and chat online. These three factors have helped our psychological biases to flourish.
Once you have identified your motives for investing, put your finances in order, and created an investment plan, the next step you should take is developing a successful investment portfolio. In this section, you will use what you have already learned about goal setting, asset classes, and investing to begin building a successful investment portfolio. Before you can build a successful portfolio, you must first understand the “priority of money,” learn the phases of successful investing, and know how to use the investment process to build your portfolio. When it comes to investing, there are six factors which control investment returns. Five of those factors are within your personal control, while only one is outside your control.
The five factors you control are:
How much you save
How long your investments grow
Your mix of investments, i.e., your asset allocation
How much you pay in expenses
Investment Process
Every investor should have a process. This applies whether