The stock market is made up of 2 groups of people
The first group, speculators/gamblers (majority) treat the stock market like a casino.
The second group, the investors (minority) treat the stock market like a supermarket of business that are on sale.
You can make money in both groups. However, to make money, you have to follow a very different set of rules
The Speculation Game
The speculation game is a lot more attractive as it gives the impression that you can get rich a lot quicker. This is true but the chances of making money over the long run is much lower (less than 5% of people end up profitable).
This is the ‘greater fools game’, where you buy something (even if it has little or no intrinsic value) because you hope a bigger fool will pay a higher price than you. That fool has to then find an even bigger fool to sell to.
To master speculation, you have to understand price action, cut losses fast, have strict profit targets and size your positions correctly. Making money is all about finding a statical edge in the markets ( “win rate x average win -loss rate x average loss” is positive)
The Investing Game
The Investing game is less attractive as it takes a longer time frame to generate sizeable returns. However, the odds of making money over the long run are much higher if done correctly (just buying the S&P 500 index ETF over the long run gives a 100% probability of profitability).
The investing game is all about identifying the top businesses that will grow and compound in value over the long run (at a higher rate than the S&P 500 index) and consistently add shares when prices are temporarily undervalued. To master investing, you have to learn how to identify great businesses and value them accurately.
I love and play both games. Which do you prefer?
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Both! Guess I can’t give up neither of them.🤷🤷🤷
I made money from investing game and lost much in speculation game.
But I still like to be part in the speculation game like GME and AMC.
Wait for CPI