Trading involves you entering into a transaction and departing from the stock you purchased within a certain timeframe. The timeframe is usually no more than a couple of days period of time, but can be a short as a few minutes. Because of the short term duration of these transactions, using tools that provide you with indicators of when to buy and sell are essential. You simply can’t trust your gut here.
These kinds of investments can be extremely hazardous. Many people have lost their shirt over these kinds of investments because they have not paid enough attention to the analysis or not gotten out of the market in a timely manner. This is why it pays to be informed.
Where a trade investment is one that is of a short duration, the value investment is one where you are in it for the long haul. This is one where you expect to hold onto stocks, maybe up until your death, expecting to see dividends provided to you over a long period of time.
These kind of stocks are quite beneficial to have, because they continually rise, meaning that you have an asset you can count on to continue to deliver a return for you. These kinds of stocks are able to endure fluctuations in the stock market, even severe crashes, yet still provide a return on investment to the purchaser.
These kinds of stocks can be such things as utility companies, car manufacturers, computer companies, and other kinds of safe investments where the stock has shown a great deal of strength over a prolonged period of time.
To purchase some of the more common stocks in this type of investment is a little more challenging, primarily because they have risen to a high level in terms of cost per share. You may have to spend $80 or more to buy one single share of an insurance stock or other similar kind of investment, and that may price you out of the market. This is where you need to turn to startup companies that looked to have a long-term potential good gives you the opportunity to make some money by being able to buy at a low cost.
How to Analyze a Stock
Now that you have an understanding of the two kinds of investments, the next thing to look at is how to make your choice. Analysis is a key here, and here are some things you should consider before deciding to plunge into the market.
What Does the Company Do?
Knowledge is the key here, and it starts with understanding what the role of that company is. What did they sell? What industry are they involved in?
These are the kinds of questions you should be asking yourself from the very start, because knowing more about the company will help you to make smart investments.