Investing, trading and speculating are all ways to produce stock market gains. They can all make money which is the only reason to get into any equity market. There are an infinite number of variations of these three basic approaches that can be used to make money.
These approaches offer a huge range of possibilities and vastly different risk levels. As well the payoffs can show considerable differences; at least in the short term. Longer term the debate over which is better will endlessly and pointlessly grind on.
We just want an approach that works, reliably produces results and lets us sleep well at night.
Managed investing strategies that identify dividend paying stocks to hold long term routinely deliver results. They most closely adhere to our capital rule one – don’t lose money. The risk profile for investing can range from conservative low risk positions to less secure medium risk companies.
It is important to know what you are getting into. Broadly speaking, if the prospective investment being considered is an established business and has a record of making money it qualifies as an investment.
It may not be a good investment but at least it passes the initial basic criteria to be considered an investment. In the future we can cover additional important criteria that must be used to sort through the many choices and judge if a company qualifies as an investment for us.
Companies that do not make money are speculations. That makes it simple. Hope but no bottom line = speculation. That covers a huge portion of the companies listed on an exchange.
Speculations are often offered as investments to the uninformed. If there is no profit they are not investments. Always check for yourself.
This is not suggesting that all speculations are bad. You could be looking at an excellent opportunity to make serious amounts of money. But you have to know if you are speculating or investing. If you want to invest, not speculate, make sure the company has bottom line.
Investing is the most conservative, steady and secure way to make money in the market. Most often good profitable investments can be held for years. In future conversations we can discuss a variety of the strategies available within the investing approach.
Tomorrow we will discuss the next basic way to make money in the markets. In addition to the approaches of investing, trading or speculating there are other more sophisticated and complicated ways to make money. Options and shorting are two examples.
Additionally, it is important to be aware and acknowledge that there are always more ways to make money in the market. During our constantly changing times in an open economy, imaginative humans create new and different ways of pursuing profit. However, at least for the time being we will leave these more advanced topics aside.
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These discussions and information intend to help you better understand markets and investing. I am not a financial or investment advisor; opinions are for informational and educational purposes only and are not intended as investment advice. For syndication of the site or blog, please contact info@WhiteTopInvestor.com.
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