To answer this question, what is it that you would like to do? Stock investment or stock trading?
I believe many people are getting interested in stock market investment these days. If you are one of them, welcome, because you are in the right place and this blog will be a good start.
Before jumping into the stock market, let's try to define what a stock investment is.
I will be giving two examples. Try to distinguish the difference between a stock investment versus stock trading. John says that he is a stock investor. He buys and sells the stock and makes a profit. He then shows you a stock price chart and drawing line explaining his or her prediction. At the same time, he shows you the trading history of buying and selling and making money in just a few days. You're hooked! You want to become a stock investor like him. Jane says that she is a stock investor. She tries to find a good company with a good income and with high potential growth. She reads the annual report to understand the business. She buys those companies and holds the stock of the company for as long as the company is doing good business.
Were you able to establish the difference? Between John and Jane, who matches your expectation of being a stock investor? The answer to the question is that both are called stock investors, but what they are actually doing are very different. They are doing it with different strategies. John buys and sells based on technical analysis. John's best tools would be a stock price chart and many indicators with many lines. I would like to call him a speculator or trader. A great example in real life was Jessie Livermore.
Jane, on the other hand, buys stocks based on her fundamental analysis. Financial reports like balance sheets, income statements, statements of cash flow, and reports about macroeconomics will be her best tools in decision making. A great example in real life would be Warren Buffet. Of course, in the real world, there are people who use both methods to develop their own styles and could be a fundamental analyst, technical analyst or somewhere in between.
So which one are you or what kind of investor do you want to be?
Are you a fundamental analyst? A technical analyst? Or perhaps somewhere in between the two?
MoneyExperimentPH