Investors are increasingly mentioned in the same breath as real-time traders these days. Aside from the fact that both seek stock profits, the differences between these two camps could hardly be further apart.
The trader could be compared to a gambler betting on rising or falling stock prices. However, it should also be noted that the so-called day traders study news about companies to determine a suitable strategy for the day. This approach is extremely risky and can lead to high losses for non-professional day traders.
Often the term speculator is associated with day trader. The approach is very similar to that of a speculator, but this term is very broad. For example, investors can also invest extremely speculatively, which makes the terminology very fuzzy.
What is an investment and what makes an investor?
The only coherent method for us to build wealth sustainably is through so-called value investing. An investment should therefore be based on a detailed analysis of the investment. The investment should be considered safe enough based on the analysis and should yield reasonable profits.
What many people don’t realize nowadays is that when you buy shares in a company, you are an owner of the company. This means that you own a part of a company regardless of how big this part is.
“The stock market is designed to transfer money from the active to the patient.”
— Warren Buffet
The success of an investor is mostly related to his character. An investor should be patient and disciplined. Have a high willingness to learn. Be the master of his emotions and be able to think for himself. A high IQ has never given any investor an advantage. On the contrary, people who consider themselves very smart tend to be arrogant. Fortunately, the investment world will quickly bring such people back to earth.
At this point, however, it should be mentioned that it is sometimes essential for investors to speculate. Speculation can be extremely risky. Every investor should be aware of what he is getting into. Should one decide to speculate based on a thorough analysis, it is important to consider a few points. First, you should know that it is a speculation and not an investment. Speculate only if you are convinced that you have the appropriate skills to do so. However, for speculation, you should risk only the money that you can afford to lose.
It is also important to set an exit strategy at the beginning. What return do I expect with this speculation? Determine a strategy and act according to it.
Someone who wants to invest but does not want to take the trouble to study a company in detail, should under no circumstances buy shares of a company. In this case, it is better to use reliable investment funds or ETFs that track major indices such as the S&P 500 or Dow Jones.
Please note that this is not financial advice, and you should consult a professional financial advisor before investing your hard-earned money. If you do decide to consult a financial advisor make sure that the financial advisor really knows what he is talking about 🙂.