ARE YOU INVESTORS OR TRADER ?
I AM AN INVESTOR.
This is the answer of most of the persons putting their money in stock
market, but are you an investor or trader would be decided by the definition of
investor. But let's answer a simple question, why we do not called ourselves as traders. It
is believed that traders are gamblers of casino. They put money in the market
and earn by chance as in casinos. Therefore all of us call ourselves as
investors. Let me define traders
Traders are individuals who invest money by reading price trends, doing technical analysis, positive news from another market and corporates, etc. For example company is going to receive a big order from the foreign customers, indicators from technical analysis, etc.
Now there should be questions in your mind who is
investor. We will answer this question later on in this post. First we should
analyse whether you are trader with respect to above definitions. Now let us
consider how your portfolio is built.
Building of Portfolio of Normal Investor.
Case I
Lets consider conversation between you(Y) and your
broker(B).
B : Good Morning sir
Y : Good Morning
B : Sir, there is a call for x ltd it is expected to
give 15% return in 3 weeks.
Y : ok Buy 1000 shares of x ltd.
B : We confirm your order of buying 1000 shares of
xltd.
Y : That’s right.
Case II
Lets consider conversation between you(Y) and your
FRIEND(D).
D : Hello how are you?
Y : I am fine. What about You ?
D: Do you know I have insider information of Y ltd
is going to invest in most profitable business. I have invested Rs.45000 in it.
Y: Ok I will also invest in shares.
Now above cases shows the ways in which most people invest money in stock market or by reading charts trends. They are all traders. Now let us see another shift in strategy, how traders become investors. If they are not able to achieve desired returns then they put their investment in long term investment and become investor.
This process goes on and you would have very large
portfolio of shares termed as trading in span of 1 year.
I am not saying trading is bad thing or you should
not trade.
My advise is If you are trading then stick to
trading rules, ie if you have entered in stock market by price trends then you
should stick to trading rules and book profit/loss by following trading
techniques only. You should not convert into investment.
Rule is simple
If you are investing then you should invest after analyzing fundamentals, and If you are trading then you should trade in stock market.
Now I would define investment
An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.
We would be learn about becoming investor in fundamental analysis and trader in technical analysis.
0 Comments