It seems that everyone has now jumped on the ‘investment’ bandwagon. It has never been easier to open a trading account with low fees, and trade shares or ETFs all over the world.
The popularity of ETF’s in particular keep rising and there has been a proliferation of different investment products.
BUT…the question you have to ask yourself is, are you investing or speculating?
You can read all the books and share trading newsletters in the world, but still make costly investment mistakes.
The main concern I have is that many people are gambling or speculating, whereas they may feel they are investing.
There is a big difference. Let me explain.
Investors take the long view on the basis that a company’s share price will increase based on improvement in its fundamentals, such as earnings/profit and cash flow.
With speculation, the buyer is betting that someone will buy the investment from them at a higher price in the short term. It’s called the Greater Fool Theory.
Share markets have historically rewarded investors who take a long-term view.
In fact, to manage share market volatility, anybody investing in shares or ETFs should take a long-term view of at least 7-10 years and be prepared to hold on to their investment when the market goes through its normal ups and downs.
Speculators typically trade more frequently and hold investments only for a short time, while they scour the internet for get-rich-quick investments. Unfortunately, this strategy typically goes unrewarded and may even lead to substantial losses for the novice investor.
So, before you jump into the share market, ask yourself whether you are in fact investing or gambling?
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