Invest in a Business, BUT Trade a Stock-Know the Difference

If you’re planning to be a long-term investor rather than a short-term trader, it’s crucial to understand that you are investing in a business. Here’s a detailed guide to help you navigate this approach:

Long-Term Investment Mindset

When you invest in a business, you must look at it for the long haul. Just as you wouldn’t buy a business today and sell it tomorrow, you shouldn’t buy stock in a company today and sell it tomorrow. This goes back to understanding your trading system and objectives. You should believe that the company you are investing in will grow over time—whether it’s 5, 10, 15, or even 20 years. However, it’s also essential to have an exit plan if the company undergoes significant changes (e.g., CEO change, merger, disaster, competition).

Ownership and Responsibility

When you buy stock in a company, you become an owner of that company. Your stake in the company depends on the number of shares you own. While individual investors are often small shareholders, you still own part of the company and should approach your investment with the same mindset as a business owner. Professional investors want to know everything that happens in the company (e.g., earnings dates, management changes, insider trading, earnings calls), and you should adopt the same habit of thorough research.

Due Diligence

Instead of thinking of yourself as a small, meaningless shareholder, consider that you are buying the entire business. Therefore, you must do your due diligence before investing any money. Connect with the business and its management, trust them, and follow them closely. This principle allows you to critique and research the business thoroughly before investing your hard-earned money.

Trading Stocks

If you are looking to trade stocks, focus on identifying patterns, backtesting your strategies, and analyzing how often you would have been correct. Technical analysis can be beneficial, and you can incorporate various indicators like RSI, MACD, and moving averages. Many strategies are outlined and explained in detail in our Prodigy Investor Course.

By adopting this mindset and approach, you can make more informed and confident investment decisions. Want to learn more at investingprodigy?