| Are You An Investor Or Speculator? |
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To be a successful market player, you have got to know yourself first. Your strengths, your weakness ' have to be sorted out. Your ambitions have to be contained ... while your patience has to be enhanced. Finally, you have got to know whether you are on the street as an Investor or as a speculator.
Deepak Sahijwala
Are You An Investor Or Speculator?
Even though you think you want to learn how to trade it is a good exercise to ask yourself if you are really an investor or speculator.
Investor
An investor is someone who buys something in the belief that over the long term the security (any investment vehicle that can be traded) what ever it may be will go up in value.
Their period of time may be months, years or even decades. They will be quite happy to own a security for a longer time period because they believe in what they have just bought or have researched the security and are happy that it will increase in value in the long term.
An example of an investor is Warren Buffet, one of the most successful investors of all time.
Commonly Referred To Sayings of Warren Buffett
* Never invest in a business you cannot understand.
* Risk can be greatly reduced by concentrating on only a few holdings.
* Buy companies with strong histories of profitability and with a dominant business franchise.
* You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.
* Be fearful when others are greedy and greedy only when others are fearful.
* Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.
* It is optimism that is the enemy of the rational buyer.
* The ability to say "no" is a tremendous advantage for an investor.
* Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.
* Lethargy, bordering on sloth should remain the cornerstone of an investment style.
* An investor should act as though he had a lifetime decision card with just twenty punches on it.
* Wild swings in share prices have more to do with the "lemming- like" behavior of institutional investors than with the aggregate returns of the company they own.
* As a group, lemmings have a rotten image, but no individual lemming has ever received bad press.
* An investor needs to do very few things right as long as he or she avoids big mistakes.
* Is management candid with the shareholders?
* Do not take yearly results too seriously. Instead, focus on four or five-year averages.
* Focus on return on equity, not earnings per share.
* Look for companies with high profit margins.
* Growth and value investing are joined at the hip.
* It is more important to say "no" to an opportunity, than to say "yes".
* Always invest for the long term.
* Does the business have favorable long-term prospects?
* It is not necessary to do extraordinary things to get extraordinary results.
* Remember that the stock market is manic-depressive.
* Buy a business, don't rent stocks.
* Wide diversification is only required when investors do not understand what they are doing.
* An investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business.
Speculator
A speculator is someone who buys or sells something with no directional bias.
He has no loyalty to the thing he is buying or selling and will typically own something from 1 minute to a few days or even weeks.
An intra day trader may buy and sell a security a hundred times in both directions in the same day. An example of a speculator might be someone like George Soros.
George Soros As a well-respected currency speculator, he once shorted the British Pound for one day and gained in excess of $1 billion.
Although not totally responsible, Soros' comments on the Russian economy contributed to their stocks plunging 12% in the first hour of trading. Five days later the currency had devalued 25%.
Best Quote
''Its not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong.''
Now that you know the difference between Speculator and Investor only you can decide which one you are.
If you intend to day trade the markets then you are a speculator. The question of whether you are an investor or speculator is a personal question of your own psychology. |
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