All about investment

By Amit Malhotra

What do you do in the stock exchange - do you use stock investment for a long-term income or you use it to earn short-term profits? The two are different aspects and need different strategies to be followed for success. A good investor might not necessarily be an efficient trader. Let us see what are the differences between the two and the strategies that could help you to become successful in stock trade.

THE INVESTOR

This is the person who buys the shares of a company and keeps them with him. When the company makes profit, he incurs a part of it. The investors do not need to spend too much time thinking about the investment. Initially, they have to deliberately invest into the stock of a company once; they don't need to think about it again if they have gone with the right company. Only in case they have not, they need to consider selling away the shares and invest into some other company. This way they do not play a very risky game and are generally satisfied with the portion of profit from the company they have invested in.

TIPS FOR THE INVESTOR

• You should be careful when you are selecting the company to invest your money in. Do good market research to know about the past and present economic status of the company to assess it in terms of consistency. Also be analytical about how it is expected to perform in the future.


• Go for renowned companies if you are an investor. Although this may look a bit expensive initially, it would save you from a lot of botheration in the future.


• If hiring a broker, hire the best stock broker you can go for. This is because you are investing for long term and a good advice from the good stock broker would cost you once but will be beneficial for you in the long-term.

THE TRADER

The stock trader is the one who invests in stocks that have a probability to increase, in demand and in price. He invests just to sell them later at an increased price and gain some profit. This is a different type of earning profit from the stock exchange. You do not incur profit from the company. You make profits due to changing demands and prices of stocks. If you want to go for this, you will need to be constantly in touch with the stock market. You will have to have an eye on the prices in there. However, successful trading is the result of subtler observations, something described in the tips that follow.

TIPS TO THE TRADER

• Unlike investor, the stock broker by a trader cannot always be the best one, for the best ones charge the highest commissions. A stock trader must consider the possible profit he can earn from a deal and thereupon decide on how much commission he can give to the broker.


• As a trader, you have to be aware of a wide number of facts and figures, which may directly or indirectly affect the prices in the stock exchange.


• A good choice for a trader would be to go for online trading. The online brokers are very cheap in terms of the commission rate charged. Also online trading will save you a lot of time you would otherwise need to waste for traveling to and coming back from the stock market.


• Always make educated and well thought decisions. Haste and carelessness are the enemies of stock trading.