Investing or Trading?


I read “Rich Dad Poor Dad” when I was really young (teenage time), since then I knew I need to do investment and start as early as possible. The question is HOW? 90% of the people who invest didn’t make money, I want to know how the 10% gain from stock market.

One of my financial goals this year is to setup an investment plan, hence recently I attended a few financial workshops to find out how. (When you have a goal, you MUST take actions J) Here is a short summary for newbies like me, if you are also interested about stock markets, there are 2 main categories how people make money:

  • Value investing
  • Trading
Investor Trader
Way to seek profit 1)      See buying stocks as buying a business, invest in companies which they see the potential of business growth

2)      They buy and hold if the fundamentals are still intact, sell otherwise

1)      See buying or selling securities as solving mathematics problems

2)      They work out a set of algorithm to increase the probability of capital gain

Company value They care about what is behind the stocks – company profile, growth potential etc Does not really matter
Tools and Techniques Read financial reports, attend company AGM, study business profile (P/E ratio, dividend rates etc); sometimes wait for an economic crisis to buy undervalued stocks Use technical charts, monitor stock movements, follow movement average etc. A lot more times they use software (technical analysis tool) to

1)      automate the monitoring part and filter out a set of potential stocks
2)      analyse the stock candidates
3)      handpick a few which believed to have higher chance of gaining
4)      set entry and exit point

Main instruments Security (stocks) Derivatives (CFD, options etc)
How to make money Share price gain over a long period and dividends Share price gain, a lot traders leverage on capital to increase the gain
Timeframe Long term, usually over a few years Short term, usually over a few days to a few months; take advantage of both rising and falling markets (for more frequent and smaller profits)
Common ground No speculation – No investing / trading without understanding the logic (ie guessing / gambling)! Start with practice account first. MUST set exit point (stop loss). There are no tips.

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Yes if you have some good insights about investment as well please do share across!

 

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