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Investor or gambler?

By Christeen Haddadin , Family Flavours - Oct 03,2021 - Last updated at Oct 04,2021

Photos courtesy of Family Flavours magazine

By Christeen Haddadin
Certified Money Coach

For some, investing is no different than gambling: Market uncertainties, steep fluctuations, perhaps some easy wins but significant losses too! There are three types of people in the stock market to be aware of. 

Investors

Investors usually buy assets that can be traded in the long run and do not worry about market noise and price fluctuations due to economic or political circumstances. They would rather focus on the fundamentals of the companies they are buying into. As long as the company is growing its market share and increasing its sales, they are happy to keep that investment in their portfolio, believing that long term value and growth will be created over time.

Traders

Traders have experience in the stock market and might adopt “buy low, sell high” strategies. They look beyond fundamentals into technical analysis of the stock movement and future patterns.

Traders have the experience and skill to use technical indicators to decide on good entry and exit points for a particular share, especially when combined with company and related sector news and updates, such as financial and operational announcements or sector-related innovations or regulations. What traders do is minimise the risk of investing.

Speculative traders

Very different from traders who mitigate risk, speculative traders seek risk. They bid on risks and follow market hypes. Speculative investors might get lucky a couple of times and cash in big wins, but they are also more prone to considerable losses. 

Speculative trading means venturing into “under the spotlight” shares, which makes it interesting, exciting and holds the promise of quick riches as speculative returns are highly lucrative, but remember, the higher the reward, the higher the risk of losing your money.

What kind of investor should you be?

If you are not very familiar with the stock market and are looking for your money to grow slowly and steadily over the years, be an investor. Build the financial knowledge you need, explore your investment goals and risk appetite and find a long-term investment plan that suits your needs.

If you have the time, interest and mindset to trade (and, of course, the skill to trade), and are willing to take calculated risks for short to medium-term returns, you can be a trader.

However, if you have extra money that you are willing to part with and take a big risk on a substantial return, you can try your hand at being a speculative investor.

No matter what type of investor you are, having a clear investment strategy built on your risk tolerance, investment timeframe and at least a fundamental understanding of what you wish to invest in, puts you in a better position to build a portfolio that could grow over the years and fund your FIRE (Financial Independence, Retire Early) goal. 

Reprinted with permission from Family Flavours magazine

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