Auto news on Youtube Apr 28 2018

Do you trade stocks? Or do you invest in stocks? The words are often used

interchangeably, but if you're serious about either - trading or investing - not

understanding the difference it could cost you! A precise explanation of that

difference coming up.

Hey! Welcome back! I'm really glad you're here. Thank you

for joining me. This may be a small one, but this understanding is yet another

step on your path to building your rapidly-growing, highly-diversified net

worth, one video at a time. There are actually four categories to

describe the act of you putting money into an individual stock: investing,

trading, speculating, and gambling. In this video we're diving into those first two.

The biggest difference comes down to your mindset or your intentions whenever

you enter a position. Warren Buffett says his ideal time horizon for an

investment is forever. That's because he finds companies that he believes will be

around a really long time. You would probably have a similar mindset, if you

decided to start your own company, or maybe if you own your own company right

now. But let's go through an example. Picture this in your head: maybe your

grandmother made the most delicious jams and jellies...

Gru: I'm developing a line of delicious jams and jellies!

...and you want to honor her by creating a family-owned

business and sharing her jams with the world. You are willing to invest all of

your savings into this business - into your business - you're not expecting to

find someone willing to pay you a higher price in the near future to get a quick

rapid return on investment. You're probably in this for the long haul. And then let's

say you need more funds to really get this business off the ground, so you solicit

your closest friends your family... "Invest in my my business!"

Your mother decides to invest in your business. She's not seeking or expecting

a surge in share value so that she can profitably trade out of the position...

No! When we're talking about an individual company, it's deeper than that.

For true investors, they believe in the company's future - in its prospects. So

they're comfortable staying along for the (often long) ride just to be part

owner of that company. When you invest it's either something in

which you truly - often passionately - believe or something you think will just

in general continue to increase in value over the long run. And then, if possible,

you'll pull out your investment according to your personal schedule - to

buy a car, a home, or for retirement. When you trade, on the other hand, you buy

into something that you believe, for some specific reason, will increase in value

by more than your other investment options. Then you plan to watch it

regularly and pull it out for a very specific reason that has nothing to do

with you and everything to do with the stock itself. It should be based either

on your thesis - your original investment thesis, your trading thesis - being

realized, being disproven, or simply changing. Maybe you've identified a

mispricing in the stock of a publicly traded company, for example. And you're

waiting for the market to recognize and correct this mispricing, to adjust to a

fair value. You plan to capitalize on that move from its current to your

expected share price. Or perhaps you've identified some catalyst for much

more rapid growth than the market's expecting, some technology or discovery,

for example, that you have reason to believe will cause a company's value to

increase by more than the market. This can happen for people who are uniquely

familiar with the potential behind specific technolgical innovations or

pharmaceuticals, for example. But more than just having this rapid growth

thesis, trading decisions are rooted in some (hopefully sound) fundamental or

technical analysis. And it needs to indicate to you that the market has not

already accounted for this supposed catalyst. You have a thesis suggesting

some sort of favorable price change and you're positioning yourself to take

advantage of that move, if and when it happens. Clearly, that's a pretty big

difference between investing and trading - a huge difference in mindset and the

amount of attention that you have to pay to your particular holding - in the amount

of research that you have to do on an ongoing basis. Both can work for you, but

one is likely going to work way better for you - based on your personality, your

temperament, and what you in particular can and want to handle. It's not uncommon

that, across your entire portfolio (your entire net worth), that you're going to

use some combination of these two. That's it! So what about you? Are you more of a

Warren-Buffett-style long-term investor? Or do you prefer finding those diamonds

in the rough and executing trades? Let me know in the comments. Or are you a

speculator? Or a gambler? Unfortunately, I believe many people - maybe most people -

who think their investing are actually speculating... We'll talk about those in

the next video as you continue to learn everything you need to know to build

your rapidly-growing, highly-diversified net worth. If you're new here, consider

subscribing and clicking the bell so that you too can satisfy that dream. Like

and share this video if you found it helpful. And then don't stop learning!

Continue on this path by watching one of these videos to get you yet another step

closer to your goal! I'll see you there. Take care.