There are no hard and fast rules that tell you how to invest in the stock markets. It depends upon personal choice and the risks that you are prepared to take. Many people are driven forward by desires and goals and others prefer the slower routes. The only person who should be deciding the route that you take should be you and your broker.
Understanding the markets is going to be the first move that you make; it is no good going into the stock markets relying on luck rather than skill. Understanding the principals and the options that are open to you will help you with the basics, but a true knowledge of what you are proposing will take skill and research before you invest actual capital.
Two masters of the modern world have each made a lot of money in the investment markets, but with completely different approaches. These approaches highlight the different options that are open to the investment markets.
This man has spent his life investing money and he is good at it. He has amassed millions of dollars in the investment company that he owns, through the principals that he uses to work out the investment strategy of each company. The main principal that Buffett follows is the ‘intrinsic value.’ This principal is explained in Investopedia:
‘The actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors. This value may or may not be the same as the current market value. Value investors use a variety of analytical techniques in order to estimate the intrinsic value of securities in hopes of finding investments where the true value of the investment exceeds its current market value.’
Knowing the intrinsic value of the company gives Buffett the information he needs to make the decisions if the company is worth investing in. The main benefit that Buffett has is an inability to allow emotions to take over.
This approach works for him, but it might not be your best option, it will depend on a lot of different factors.
A different approach
A completely different approach to the type of investing to the style of Warren Buffett is George Soros; he has a different way of making money on the investment market.
George Soros has the short and fast approach to investing in the stock market. The short-term plan has worked well for Soros; he has had some great success as well as some failings. But, this is part of the investing market open to the possibilities of success and failures.
Soros has made many choices that involved short-term options that made him a lot of money, but you need to consider the risks in this market are considerably higher. This means that the likelihood of losing your capital is high and out weighing the risk in relation to the return needs careful consideration.
But whatever option you consider as the right one for you, then you must create an investment plan that will guide you through the decisions that you will need to make.
An investment plan is something that you can work on with your broker, go through your options and the risk that you are willing to take will help you make the right decisions for your investment strategy, whatever option you decide is right for you.