We continually see new trading apps and investment platforms that require little to no money to get into. These apps almost make investing seem like a fun game, and while it certainly can be fun, there should also be caution with this approach. Every investor has to start somewhere, but don’t let your start be just a gamble.
One of the indicators that might determine whether you are a gambler or an investor is your approach. Are you taking a long-term or a short-term strategy with your investing? Investing is really about the long-term approach.
Seasoned investors might not always stay in a single fund for an extended period, but the overall goal is to remain in the market for the long-term and not just jump in and out. An investor understands that staying in for the long haul is a better approach that will pay off more in the end.
Gamblers seek that quick turnaround. They want a high return, and they want it fast. They jump in with the intent of jumping back out for a return, but it’s a gamble and may not always pay off because of market fluctuations.
Choosing Stock by Name or Trend?
You’ve most likely heard the phrase “buy low, sell high.” Investors live by this standard. If there is a particular stock you are interested in, you watch for the opportunity to buy at a low point. Otherwise, you look for a stock that is low and buy during low points. When the market is down, an investor will use that as a buying opportunity.
A gambling investor will be more likely to buy based on a trending stock or a stock they know by name. It might not be a great buying point, but they are jumping in because of a trend. The gambler often buys even in a rising market situation based on a trend or a hot stock.
To Diversify or Not?
Keep in mind that investors are typically in the market for the long haul. This means they are worried about a long-term return rather than a quick return. In this particular outlook, diversification is vital to the investor. They often look for a blend of stocks, funds, and varying asset classes to diversify their portfolio. Diversification can also take into consideration risk tolerance and long-term goals.
Gamblers, on the other hand, are more often just seeking a return. They take little to no focus on diversifying their portfolio and instead focus on finding high-performing stocks and funds in the moment. They may have some diversity, but that is not the overall focus or concern of their choices.
When you look at these primary points, do you find yourself classified as an investor or a gambler? There is not necessarily a right or wrong way as long as you know the risks and benefits that can come from different approaches.