Stock Market Investing - What is investing

Stock Market Investing - What is investing?

Many people keep on hearing about investing in the local newspapers, TV channels and financial papers, magazines, on the internet and in other social mediums of communication.

Yet people don’t know exactly what investing really is.

You may have heard that investors lost billions of dollars in bad deals or that investor’s book high profits every day.

In today’s economy, people are confused between investing, so they speculate alot.

Speculation is predicting the movement of market in short term i.e. it may be for the coming day, week or month, even a year from now.

Investing on the other hand is analysing a business as if you were the owner of that same business (actually, when you buy shares, you are the owner) and see if the business is worth buying or not.

Investors, after buying a business, don’t see changes in the daily stock prices every day, instead, they just sit and wait as the business grows, since they believe that if the business is fundamentally growing, the prices of the shares will automatically rise with the business.

Some may wonder, ‘Fundamentals, what the hell is that?’

Fundamental of a business is a very vast topic in itself and so I may not be able to cover it here in this article but I will surely explain in more details in more articles to come.

In short a fundamentally good business is the one whose sales, margins and profits rise in time.

The usual period that an investor holds the stock ranges from 3 years to decades, being 3 years the bare minimum (unless the fundamentals of the business changes drastically and stock prices go down).

There are other tools available in the market that people use to make money in stock market. They are the so called sophisticated tools……also known as derivatives.

These have been called as the “weapons of mass destruction” by supposedly world’s greatest investor of Omaha ‘Warren Buffett’.

Yet I believe that a person can make the odds turn into his favour if done correctly, and turn these so called “weapons of mass destruction” into “weapons of mass profits”.

I’ll talk to you about them later in the following articles. Feel free to participate and comment.