introduction
I wrote an article a year ago – “[Deep Financial Management 13] Investment and Speculation Gambling” , which mainly talks about the difference between investment and speculation, and today’s article I want to further improve this topic.
The importance of investment strategy
Many people who speculate in stocks (including me now) clearly are speculators (short-term), but they do not stop when they reach the stop-loss level. The stocks are quilted, and they comfort themselves that it is a value investment. When it came time to take profits, I was reluctant to sell stocks and confidently said that I would make long-term investments, but in the end it turned into a loss of money, or even heavy losses.
The reason for these things to happen is that you have not determined your investment style, you have not strengthened your investment strategy, and you often end up losing money.
The difference between investing and speculating
Both “investment” and “speculation” are neutral terms. It doesn’t mean that investment is superior to speculation. In fact, it’s just a search for feeling good about yourself. After all, the ultimate goal of investment and speculation is to make money.
Don’t blindly sit in the seat just because “value investing” sounds righteous and be forced to become value investing.
Of course, you can make money in both ways, but you must match your personality and clarify your trading style in order to play well. If you play well, you will naturally make money, otherwise it will be difficult to make money, or even lose money.
invest
thinking:
- Stocks represent the company, including the management team, company products or services.
- The estimated duration of holding stocks is generally long-term holding. How long is long-term holding? It varies from person to person, there is no standard answer, at least half a year.
speculation
thinking:
- Simply buying and selling stocks, you don’t need to care about the company, including the management team, the quality of the company’s products or services, but only about price and risk.
- Profit by capturing a period of significant price movement. The holding time can be one day, one week, or even one month or one year. They are rarely held for a year or more.
How to find your own investment strategy
Depends on your personality, beliefs, knowledge, use of funds and feelings and so on. Of course you can be both an investor and a speculator. Of course you need to pay attention to:
- Don’t be a speculator with an investment mindset
- Don’t be an investor with speculative thinking
Three key points
Whether you’re investing or speculating, it’s critical to do these three things well:
Do a good job of risk management and set stop loss points
To do a good job of risk management, you must set a stop loss point for yourself.
Warren Buffett said, “The first commandment of investing is never to lose money, and the second commandment is to never forget the first commandment.” It’s not that you can’t say a penny, but it’s emphasizing not to lose your principal. .
Follow the trend, don’t buck the trend
We should buy long-term upside stocks, not long-term downside stocks. If your holdings end a long-term uptrend, you should sell decisively whether you are investing or speculating.
If you are a newbie, choose a strategy first
The novices here include both newcomers who have just entered the market and experienced novices. The basis for judgment is whether you can make money in the long run.
At last
To sum up, this article is mainly about:
- The difference between investing and speculating
- There is no difference between investment and speculation (right or wrong), it is just a matter of choice
- Which strategy should be implemented, which strategy should be used in the way of thinking to act
Follow me and I will share more investment knowledge in the future. In the next article, I will share how to speculate well.
This article is reprinted from: https://blog.forecho.com/how-to-find-the-right-stock-investment-strategy-for-you.html
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