Investors often spend a lot of time worrying about things that are beyond their control. They have absolutely no effect on shares rising or falling, and yet still obsess over every minute detail. Investing in the stock market is very much a long-term game. It’s about cashing in at the right time and, equally, about cashing out at the right time. There’s no real guaranteed formula for success. It’s a lot of guesswork, albeit educated guesswork. You draw on your experiences in the market to know when is the perfect opportunity to cash out for maximum returns.
There are two types of shares enthusiasts on the stock market, and both have an important role to play. I’m talking about the stock investors and the stock traders. Those terms are often used interchangeably. And while they both play very similar roles, they do have some pretty defined differences. Let’s take a look at some of them.
Stock Traders
Working either individually or as part of a consortium, stock traders will look more to the market for inspiration. They won’t obsess over every minute detail that they can’t control. Instead, they’ll focus on market trends to see if they can find a pattern to exploit. A stock trader is the polar opposite of a stock investor. Why? Because they’re looking for short-term gains. They will look at the market when prices are at their most volatile and take advantage of that. By understanding the nature of the stock market, they can predict values dipping and rising again. Using that knowledge, they’ll make their moves when shares are low, with the expectation that they’ll rise again. Not too dissimilar to the investor, you might think, but you’d be wrong. The key difference is that traders want to quit while they’re ahead. They don’t want to sit on shares for years or even decades before seeing a return. If you’re looking for quick cash, you should look for more information on becoming a trader.
Stock Investors
The most common type of person associated with the stock market, at least to the public eye. These city slickers know how to play the game, but they’re in it for the long haul. They make their own investments in equity in the hope of making a profit through interest or appreciation.
They’re an analytical bunch that operate with a ‘hold what you have’ policy. They see no reward in cashing out when shares are down, and rightfully so. That involves a lot of patience, though.
What do investors look for when they’re looking to pump their capital into shares? The main area is profitability. They’ll likely look at the market for assets that they can buy low with the potential to grow. They will look to piggyback off startups and small businesses and hope they make it big. If they do, the rewards speak for themselves.
When investing in shares, there are two main areas that you need to focus on; value and prospects. You must analyse whether the value of the share represents good business. At least in comparison to the potentially lucrative future. It’s a game of risk and reward.
