Investing is not trading and I understood that after a couple of mistakes. Investing is basically buying a business and in this case buying a part of business. Investing is definitely not gambling but trading is. In the long-term, one can make lot of money through trading (gambling) but will eventually lose most or all of it. The right way of investing is to pick and choose a right stock that has a future and demand for its products and then invest some money on it. Like any personal business, it takes time to grow and so have some patience. Too many clicks of your mouse to buy and sell take away the advantage of growth. It is very important to buy good stocks not cheap stocks (because the price is low). Once you buy a stock, keep it for a long time and have a goal for that stock. Say, you want to sell a stock after it doubles and that is when you sell that stock and make some profit. Remember emotion is the enemy and time is your friend. Too many trades ruin the game and it becomes a speculative game rather than growth game. If your stock falls below certain level, sell it to avoid complete loss (say your stock is going bankrupt). In general, it always pays to wait and wait until you get what you want. As warren buffet said, never lose money and it is true. Do a lot of research about the business you are interested in and once you buy, stick with it no matter what TV reports or Internet reports or friends say? Nobody knows what will happen tomorrow and I mean nobody; even Warren Buffett. So always do your research and go on with your gut feeling. Set some filters in choosing a stock and if the stocks you are interested in pass through them then you buy. Up’s and Down's are common and so understand and accept the trend. There are more lessons to be learned and i will write in coming times.
Monday, May 17, 2010
Lessons I Learnt About Investing
Investing is not trading and I understood that after a couple of mistakes. Investing is basically buying a business and in this case buying a part of business. Investing is definitely not gambling but trading is. In the long-term, one can make lot of money through trading (gambling) but will eventually lose most or all of it. The right way of investing is to pick and choose a right stock that has a future and demand for its products and then invest some money on it. Like any personal business, it takes time to grow and so have some patience. Too many clicks of your mouse to buy and sell take away the advantage of growth. It is very important to buy good stocks not cheap stocks (because the price is low). Once you buy a stock, keep it for a long time and have a goal for that stock. Say, you want to sell a stock after it doubles and that is when you sell that stock and make some profit. Remember emotion is the enemy and time is your friend. Too many trades ruin the game and it becomes a speculative game rather than growth game. If your stock falls below certain level, sell it to avoid complete loss (say your stock is going bankrupt). In general, it always pays to wait and wait until you get what you want. As warren buffet said, never lose money and it is true. Do a lot of research about the business you are interested in and once you buy, stick with it no matter what TV reports or Internet reports or friends say? Nobody knows what will happen tomorrow and I mean nobody; even Warren Buffett. So always do your research and go on with your gut feeling. Set some filters in choosing a stock and if the stocks you are interested in pass through them then you buy. Up’s and Down's are common and so understand and accept the trend. There are more lessons to be learned and i will write in coming times.
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