A few days ago I met one of my friends Who told me that he traded a little bit of money and made it twice as much, I was shocked when I heard this! I thought to myself, is it this simple to increase your money twice or thrice as much? So, even I started to trade, And I started my trade with 10,000 Rupees But my trade of 10,000 Rupees, in ten days reduced to become 5,000 Rupees. I suffered such a big loss only in ten days, What was the reason behind this? Why, during trade, do we lose our money so quickly?
Keeping in mind how its value can increase, down the line, or in a few years. The same thing happens in a share market, for example, that you have put in some money in a share, Thinking that in a few days its price is going to increase, Without thinking what its business is and how the business can expand in the future Then this is a case of trading. But in this case, if you put in your money in a company's share, by seeing what the company's financials are, how the company conducts its business, What the company's profits are, how has the company performed in the past few years, What the value of the company is, then you are investing. Because, at the time of investing if we put in money in any share, The first thing we see is, What is the value of the company? How is the company's business? Keeping all this in mind when we think of putting in money in a company, Then we react like an investor.
Second, we should not get very emotionally attached to any company. You should always remember that if you have invested in any company, Then your hard-earned money has been put into that company, If that company does not perform well, or continues to decline. Then you should exit from that company at the right time. For example, you bought a share from a company at 100 Rupees and an issue of corporate governance comes up in the company, because of which its share price comes to 60 Rupees. You realize that something is going wrong in the company and that it's the time to exit from the company. But retail investors, get very emotionally attached to a company and like to believe that the company will bounce back and the price of the share will go back to 100 or 120.
The mistake we make is that, in that situation, we invest more money. Because of which, the other stocks we have in our portfolio, In which we should invest money, we remove money from that and invest it in the former company. Even when we know that the company is not going to perform well And all our money is gone and as an investor, we lose all our money. Making mistakes during research is not made just by retail investors, But also by big investors like Rakesh Jhunjhunwala who also invested a lot of money in DHFL, and when the shares came down, he bought more. So, mistakes are made by everyone, But we must rectify our mistakes at the right time and exit. The stock at the time when we know that it's not going to perform well in the coming time.
So, until now, How you can decide whether you are a trader or an investor and how by being an investor, you can make correct strategies to earn the most money. Now, I will tell you what is right for you between trading and investing. I will not say that trading is wrong and you can never earn money by trading. It is possible to earn money by trading. But for retail investors like you and me, it is extremely difficult, Because during trading, the opposite party, is a lot more qualified than us And when retail investors, start to trade, the counter parties are very big companies. They put in a lot of strategies behind every trade which we don't know about. So, I will not say that trading is very wrong. But the knowledge, information, and the system required for trading that retail investors don't have. So, for retail investors, the safest and best way to earn money is through investing. Because the benefit of investing is that whichever company you're investing in, it's for a long time and if the company performs well in the future, then the share price will go up with which you can benefit apart from this if you invest for a long time, then are is a big chance that if the company performs well, they will give you a dividend.
So, there are a lot of ways through which you can get an income, Because of which the chances of you going through a loss become a lot lesser. This is why the trading and investing are both good, But for retail investors who are just starting to invest, Who are thinking to put money in the share market, Investing is very useful and simple for them and they have lesser chances of losing money and more chances of making money.
You must have heard the names of some very big investors like Warren Buffet, Rakesh Jhunjhunwala, and many others, but you would've heard very less names of successful traders. Because trading is very difficult and complex, and people like you and me making money of trading happens very rarely. People like us often get greedy that we'd be able to make money of trading, But we lose money again and our belief in the share market is lost and we exit it. You must be thinking that you should start investing now. That you want to learn how to see a financial statement.
Comment down below and let us know whether you are a trader or an investor And if you are an investor, which companies have you invested in So that our other readers can also learn from you Because, from your recommendation, a good company has come up, which other people can also invest in. Happy investing!
Thank you
Difference between investing and trading
How there is more of a chance to lose money while trading And how there are more chances to earn money while investing. For example, I have some money and I decide to buy an apartment, I bought the apartment and in 10-15 days, the value of the apartment doubled, so I sold it I took my profit and left. So, this is a case of trading, But if I invested in an apartment, Thinking that in some time, a highway is going to be built near it Or a metro station is going to be built near it. So, when I put in money in the apartment, for the long term, That is called investing.
Keeping in mind how its value can increase, down the line, or in a few years. The same thing happens in a share market, for example, that you have put in some money in a share, Thinking that in a few days its price is going to increase, Without thinking what its business is and how the business can expand in the future Then this is a case of trading. But in this case, if you put in your money in a company's share, by seeing what the company's financials are, how the company conducts its business, What the company's profits are, how has the company performed in the past few years, What the value of the company is, then you are investing. Because, at the time of investing if we put in money in any share, The first thing we see is, What is the value of the company? How is the company's business? Keeping all this in mind when we think of putting in money in a company, Then we react like an investor.
How to find you are Investor or trader?
- The first trait with which we can decide whether we are a trader or an investor Is that whenever you put in money in a share, Do you put in a money based on its price or its value? When it comes to price, for example, there is a share that trades on 100 Rupees It fell to become 60 Rupees Without thinking and knowing it business, you put in money for that share, the share that was worth 100 rupees is now worth 60 rupees So, I should buy it. In this case, you are trading. But if you put in money in a share by looking at its value, Then you're reacting like an investor.
- The second trait that can help us differentiate Is when you put in money if someone tells you to, then you're reacting like a trader, For example, when I first started putting in money in the share market, Then one of my friends told me to buy a share from some company And I, without thinking or knowing anything about the company and having any information, put in money in that company And in that case, I lost money And it's not just me, in this case, many retail investors like me, lose their money. When they put in their money in a company without any information, based on what someone says So, if you ever put in money in a company based on what someone says, Then you react like a trader and not an investor So, the first thing an investor would do after hearing about this company, is research about it. They would see what kind of work the company does, what product the company makes, What raw materials are used to make the product, how the company's competitive advantage is and what its financials are, After that he will decide whether he wants to put in money or not.
- The third trait is that, a trader, before putting in money, sees the technical charts Or believes the news and puts in his money too fast, thinking that very soon its price will go up But, an investor never looks at technical charts. He tries to evaluate the intrinsic value of a company. What the value of the company is and he tries to gauge the company's value in different ways and when he understands that the value of the company is good, then he decides to put money in. But a trader, on many occasions, based on technical charts and rumors, decides to put money in the share market. When the market goes up and down a lot, a trader comes into action. He feels that when the market is volatile, he can enter the market and when the price goes slightly higher, he can sell and leave. If in that situation there is an investor, he firstly selects a good company. He doesn't think about the broader market first He selects a good company, reads about its business, Then puts money in the company without thinking whether the company is volatile or not. Because the market's volatility makes no difference to him. On the other hand, a trader tries to make the most money when the market is volatile, some traders come out successful, But a lot of traders like you and I, lose their money as well. Based on these traits, you can decide whether you are a trader or an investor.
What mistakes we make as investor?
The biggest mistake we make as investors is that we don't diversify our portfolios. While investing, we choose a good stock and invest a lot of money in it And many times, retail investors like you and me, we make a lot of mistakes. Because our research isn't necessarily always right And what happens, in that case, is that, all our money is invested in one company. When that company declines, we face a big loss and because of this, many investors undergo a big loss. To avoid this loss and to rectify our mistake, We should invest our money in different companies. We should diversify our portfolio. The main benefit of diversifying is that our risk becomes lesser, Our risks diversify. Because of which if one company goes down, then we can get a profit from other companies And our loss is not as much. So, if you are an investor the first thing you should keep in mind is that you have to diversify your portfolio.Second, we should not get very emotionally attached to any company. You should always remember that if you have invested in any company, Then your hard-earned money has been put into that company, If that company does not perform well, or continues to decline. Then you should exit from that company at the right time. For example, you bought a share from a company at 100 Rupees and an issue of corporate governance comes up in the company, because of which its share price comes to 60 Rupees. You realize that something is going wrong in the company and that it's the time to exit from the company. But retail investors, get very emotionally attached to a company and like to believe that the company will bounce back and the price of the share will go back to 100 or 120.
The mistake we make is that, in that situation, we invest more money. Because of which, the other stocks we have in our portfolio, In which we should invest money, we remove money from that and invest it in the former company. Even when we know that the company is not going to perform well And all our money is gone and as an investor, we lose all our money. Making mistakes during research is not made just by retail investors, But also by big investors like Rakesh Jhunjhunwala who also invested a lot of money in DHFL, and when the shares came down, he bought more. So, mistakes are made by everyone, But we must rectify our mistakes at the right time and exit. The stock at the time when we know that it's not going to perform well in the coming time.
So, until now, How you can decide whether you are a trader or an investor and how by being an investor, you can make correct strategies to earn the most money. Now, I will tell you what is right for you between trading and investing. I will not say that trading is wrong and you can never earn money by trading. It is possible to earn money by trading. But for retail investors like you and me, it is extremely difficult, Because during trading, the opposite party, is a lot more qualified than us And when retail investors, start to trade, the counter parties are very big companies. They put in a lot of strategies behind every trade which we don't know about. So, I will not say that trading is very wrong. But the knowledge, information, and the system required for trading that retail investors don't have. So, for retail investors, the safest and best way to earn money is through investing. Because the benefit of investing is that whichever company you're investing in, it's for a long time and if the company performs well in the future, then the share price will go up with which you can benefit apart from this if you invest for a long time, then are is a big chance that if the company performs well, they will give you a dividend.
So, there are a lot of ways through which you can get an income, Because of which the chances of you going through a loss become a lot lesser. This is why the trading and investing are both good, But for retail investors who are just starting to invest, Who are thinking to put money in the share market, Investing is very useful and simple for them and they have lesser chances of losing money and more chances of making money.
You must have heard the names of some very big investors like Warren Buffet, Rakesh Jhunjhunwala, and many others, but you would've heard very less names of successful traders. Because trading is very difficult and complex, and people like you and me making money of trading happens very rarely. People like us often get greedy that we'd be able to make money of trading, But we lose money again and our belief in the share market is lost and we exit it. You must be thinking that you should start investing now. That you want to learn how to see a financial statement.
Comment down below and let us know whether you are a trader or an investor And if you are an investor, which companies have you invested in So that our other readers can also learn from you Because, from your recommendation, a good company has come up, which other people can also invest in. Happy investing!
Thank you
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