Today I am going to touch on the topic, investing in shares. A lot of people, when mentioned trading shares to them, they meant it to be a risky activity.They believe the share market is for those who have a huge appetite for risk.
Financial advisors advocate the idea that, high risk means high return.
Low risk means low return. However, is this widely perceived view really true?
Well….to address this question, I will segment the type of investors into 2 categories.
1) The speculators
These are the people who invest in stock markets based on other people’s opinion. Someone told them the XXX stock price is going to jack up soon, and they begin to invest in the stock quickly.
They are financially illiterate (do not know how to read financial statements) and rely on instinct (gut feel), others’ opinion to make decision. They go to sgx.com everyday, looking at the chart of prices and hope that the price will just rise up, enough for them to sell and make big profits.
When the stock price goes down, they wait, hoping that it will go up soon.
When it goes down further, they begin to realize that they have nearly wiped all the capital that they have initially invested. They do not know when to cut down loss.
To them, trading in shares is like gambling. Sometimes win, sometimes lose, BUT the odds of losing is more than the odds of winning.
2) The Savvy Investors
These are the people who are financially educated. They rely on financial statistics to make decisions. They peruse the annual report given to them; calculate financial ratios from the profit and loss statement, balance sheet and cashflow statement.
They interpret financial statements, as the future performance of the company.
These are the people who will make the educated decision all the time.
They will be unmoved even if the stock market goes heywired because they have done their research.
They have successfully identified valued stocks and invested in companies whose management is honest, transparent and intelligent.
So guys…If you are a speculator, its time for you to be a savvy investor. Read books on financial management.
Books on stocks. Make yourself competent before doing any investments. AND you will find investing in stocks fun and exciting! 
My other related posts that may interest you:
- What Exactly Is Options Trading?
- Blue Chips or Penny Stocks? Which is better?
- NTUC Income Funds,Super Good Place To Invest Now?
3. September 2007 at 2:47 am
You are right!
The only way for you to make money in the stock market is to be competent in it!
Example is those who actually do mountain climbing.
Its a dangerous, risky task for most of us because we have not done it before.
But for those who are experience,
this is a feat that is fun and exciting!
Albert Leong