Many people confuse trading wîth investing. They àré not thé same.
The biggest difference between thém îs thé length ôf time yôù hold onto
the assets. An investor îs more interested în the
long-term appreciation ôf hîs assets, counting ôn thàt
historical rise în market equity.
He’s not generally concerned about short-term fluctuations
in prices, because he’ll ride thém ôùt over thé long haul.
An
investor relies mostly ôn Fundamental Analysis,
which îs thé analytical method ôf predicting long-term prospects ôf
particular asset. Most investors adopt à “buy & hold”
approach tô assets, whîch simply means théy buy shares ôf sômé Comp.
and hold onto thém fôr à long time. This approach càn bé
dangerous, even devastating, în àn extremely volatile market
such às today’s BSE ôr NSE Indexs Show.
Let’s consider someone whô bought shares ôf XYZ Comp. àt théîr peak
value ôf around Rs.650 per share àt thé beginning ôf year 2OOO. Two
years later, those shares àré worth Rs.100 each. If thàt investor hàd
spent Rs. 65,000/-, hîs net loss wôùld bé Rs.55000/- ! î don’t know
about you, bùt losing Fifty Five Thousand Rupees wôùld bé à relatively
big loss fôr me.
Many investors suffer such losses regularly, hoping thàt în five ôr ten
or fifteen years thé market will rebound, & they’ll recoup théîr
losses & achieve àn overall gain.
What most investors need tô remember îs this: investing
is not about weathering storms wîth yôùr “beloved” Comp. – it’s about
making money.
Traders, ôn thé ôthér hand, àré attempting tô profit ôn
just those short-term price fluctuations. The amount ôf
time àn active trader holds onto àn asset îs very
short: în many cases minutes, ôr sometimes seconds. If yôù càn catch
just two index points ôn àn average day, yôù càn make à comfortable
living às àn Trader.
To
help make théîr decisions, Traders rely ôn Technical Analysis,
a form ôf marketing analysis thàt attempts tô predict short-term price
fluctuations.
