Are you looking for an investment in stock market? The first step is to enter in stock market and invest some money. Before investing money you must decide that if you be a trader or investor. It looks like a strange statement but this is very true. If you are unable to distinguish between these two terms you then probably remain confuse when things are not going in your ways and you will switch between stocks buying and company investment resulting an ultimate loss.
Before we talk more on the issue let us learn the difference between buying the stocks and investing in a company
One who buys’s the stock
If you buy stocks keeping in view the price movement i.e., having some technical analysis, market news etc. Clearly you intend to earn profit from price movement you will sell the stock when ever price movement will occur and will move to another stock with the same plan, without any interest in the company holding the said stocks. You will just make sure that this is the right place to purchase or to move to another stock
One who invest in a company
One who invest in company will have to analyze and understand some basic facts
1 calculate the company’s long term growth potential
2 Reputation of company in market what it is doing and what it is going to do in near and far future
3 After all these calculation if price go down one must have the understanding that if it is a temporary fluctuation or it is some thing which will have a long term impact on the prices of stocks
Again this is terminology time. One who is only interested in the sale purchase of stocks is a trader and one who buy’s the company is the investor
Traders never hold stocks for a long time while on the other hand investors keep on holding the stocks for a long time
When the things are going accordingly then there is no problem either with trader or with investor. The problem occurs when things are not going according to your calculations.
When prices of stocks began to fall clever traders usually sell their holdings when the price falls 7% to 8% thus they avoid big loses. Question is why they sell stocks at 7% or 8% fall. Answer is simple they always expect a market rebound so they wait till prices may fall at their threshold level.
On the other hand when the prices of stocks began to fall, investor will re analyze that if he had missed some thing or some thing happening unusual or this is a temporary slum, and or it is time to add my holdings. An investor wills not to sale his holdings on 7% rule because he has batter understanding over company potentials and other factors.
There will be more trouble with trader when he began to act like investor, he will guess about the company status and he will hold the stocks, he will bear heavy loss.
I conclude that one must decide that he is an investor or he is a trader and then behave like that, then he will be able to find any luck out there
What do you think – where is Difference between a trader and an Investor ?