When it comes to making money in stock market, there are two types of people who put their money at stake. The most common are people who buy shares at low price and sell at profit. The time for which they hold on to the share is ranging from few days to few months depending upon what is the level of profit they expect. Their time of exit is totally driven by that fact that at what value the share is trading. If they are making sufficient profits they will sell ttheir holdings and exit. These people are called traders.
There is another genre of people who make fortunes in stock market and they are called investors. I know many of you are getting confused by seeing a demarkation between traders and investors. Traders buy and sell shares in turn they alone profit from this process of trading. But whan an investor buys a shares he buys to aid the growth of the company and to the country alltogether. An investor buys shares of companies that have a strong ‘fundamentals’. When an investor invests in a company he buys it not for selling but holding it forever. The share of the company makes him a partner in the business. If an investor thinks that a particular company is going to give him good and sustainable returns he will keep his money parked in that company.
The best advice that can be given to an aspiring investor is:
(1) to buy the shares of fundamentally strong company
(2) buy with the objective of holding on to the shares for a life time
(3) at most time your entry when the stock prices are falling. Though in longer run timing the entry is irrelevant,
(4) a long term investors makes money in the form of dividends and also due to price appreciation of a share. Companies do offer bonus shares to long term investors.
(5) traders keep a 24×7 track of the share market. but investors do not bother about daily movement of stock indices. Actually they never track prices after thay have invested in a company. In long term they will make money with the growth of the company.
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