Ready to start investing your money into new opportunities, rather than leaving it to gather dust in your savings account? Most investing professionals will tell you that the first step is figuring out how you’re going to build your portfolio. There’s no one way to start building wealth. The strategy that you choose will depend on whether you want to make a profit in the short-term, or whether you’d like to earn extra cash in the long-term.
The first thing you need to know is that if you decide to use stocks to strengthen your wealth, then you won’t automatically become an investor or a trader. There are different ways to use the stock for financial growth, and whether you’re looking for long-term or short-term results will guide your strategy. You’ll also discover that the path you take will lead you to a specific kind of analysis too.
To understand the difference between the two main kinds of analysis in the stock market, you need to first figure out how to define trading and investing. If you’re looking to learn how to make a living day trading, then you’re likely to become a trader. This means that you move between different financial positions quickly, buying and selling according to the opportunities that present themselves. On the other hand, if you’re hoping to hold onto a position for a long period of time – such as months or years, then you might be more inclined to invest.
This basically means that you focus on developing your wealth in the long-term, rather than getting results right now. While the motivation between both kinds of buying and selling is different, it’s also worth noting that the kind of analysis varies too. The two main kinds of analysis in trading and investing are fundamental and technical evaluation. If you’re going to trade for a living, you’re going to usually go the technical route. On the other hand, if you’re sticking to investing, then you’d consider fundamental.
Both types of evaluations ask you to take a deeper look at what’s going on in the landscape around you, so you know that you’re going to make the right decision for your money. When you take a fundamental approach, you do your due diligence on everything you need to know about the company that you’re taking a share in. You might look at things like who is responsible for managing the business, and what kind of financial reports they’ve been publishing lately.
Examining the company in depth helps you to determine whether you should buy or sell based on whether you think the brand is over or under-valued in the current market context. On the other hand, technical analysis doesn’t look at what the company does but instead focuses on things like patterns, stock charts, and movements in the chart. With a technical approach, you’ll get more involved with slightly more specific ideas, like resistances, supports, and even moving averages. This can require a little more training at first if you’re new to the industry.