177) Investing vs Trading

If you are timing the market, you are trading. NOT Investing.

A Stock or share is "ownership"of a company that does business. You need time to grow the business and need time to make reasonable profits.

Do you time when to open a business? Or you open the business on any date. Well, most people will find an auspicious time and date to open the first day. But after that, the business will be opened during normal business hours. Some shops never close at all. Like few petrol stations and convenience stores.

You don't need to open and close the business randomly, depending on market conditions. Normal business will NOT open longer hours during good market and close earlier during bad market times.

If you are trying to find the best time to buy and sell, you are timing the market. The problem about market timing is that you will never know when is the best time, until it had passed. You will be stuck to the computer screen to look for the best price. You can put in the price you want, but you may not get it.

You can just buy at the current market price to get the stocks. Then after you buy, the price go lower. What do you do? Do you buy more or regretted you bought too early.

Sometimes, you will be able to buy at the lowest price. Then, what do you do? Do you sell it the next day? Or do you wait for it to go higher? Or, you may set 10% profit and you sell it away. Let us say, the price did go up 10% and you sold it away. Congratulations on your good work.

However, the price keeps going higher. What do you do? Is it time to buy again as the uptrend momentum is strong? Or do you wait for the price to go down again before you buy again.

However, be careful of any stocks that just shoot up in a very short time. Those are speculation by traders. When the stock price go up very fast, it will come down very fast too.

If you follow this method, you are trading. A lot of your time will be spent monitoring the technical charts will thousands of indicators to consider.

Buying stocks to invest is like buying a business. Just as a business needs time to grow, investing needs time. Let time be your friend.

You will notice that the Stock Market is always volatile. There are ups and downs during the trading hours. But, in the long period, good company stocks always go higher.

The main reason is that the business makes profit over time and thus add value to the company's shares. As business need time to make more profits, the stock price will go up in the long term.

So choose your company stocks well with good business fundamentals. If you don't have the time to search and find good companies, get professional fund mangers to do for you.

What is the difference between investing and trading?

Investing is the act of owning something (stocks, unit trust funds, property) that an investors thinks will have more value in the future. Investors will hold the investment to earn profit when the value increases and will take a more longer term approach. The timing is not so important.

Trading is the actual transaction that occurs when you buy or sell investments. Traders buy and sell the investments to take advantage of short term market swings. The buying and selling timing is very important.

The easiest way to invest into good companies stocks is by investing into Equity Funds. Your Unit Trust Consultant will be able to assist you in recommending suitable funds for your financial objectives.

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