How should investors behave in the stock market ?

How should you behave in the stock market?

An investor calculates what a stock is worth ,based on the value of its businesses. 

A speculator gambles that a stock will go up in price because somebody else will pay even more for it. As Graham once put it, investors judge “the market price bye stablished standards of value,” while speculators “base [their] standards of value upon the market price.

 For a speculator, the incessant stream of stock quotes is like oxygen; cut it off and hedies. For an investor, what Graham called “quotational” values matter muchless .Graham urges you to invest only if you would be comfortable owning a stock even if you had no way of knowing its daily share price.

 Like casino gambling or betting on the horses, speculating in the market can be exciting or even rewarding (ifyouhappentogetlucky). But it’s the worst imaginable way to build your wealth. That’s because WallStreet, like LasVegas or the race track, has calibrated the odds so that the house always prevails, intheend, againstc everyone who tries to be at the house at its own speculative game. 

On the other hand, investing is aunique kind of casino one where you can not lose in the end, so long as you play only by the rules that put the odds squarely in your favor. People who invest make money for themselves; people who speculate make money for their brokers. And that, in turn ,is why WallStreet perennially downplays the durable virtues of investing and hypes the gaudy appeal of speculation.

1.What is trading in the stock market?

 .This usually means buying stocks when the market has been advancing and selling them after it has turned downward. The stocks selected are likely to be among those which have been “behaving” better than the market average. A small number of professionals frequently engage in short selling. Here they will sell is sues they do not own but borrow through the established mechanism of the stock exchanges. Their object is to benefit from a subsequent decline in the price of the serious issues, by buying them back at a price lower than they sold them for (A sour quotation from the Wall Street Journal on p.19 indicates, even “smallinvestors” perish the term! sometimes try their unskilled hand at short selling.)

What is short selling in the stock exchange?

term selectivity.This means buying stocks of compa-

nies which are reporting or expected to report increased earnings,or for which someother favorable development is anticipated.

What is long term selectivity in the stock exchange?

Long-term selectivity. Here the usual emphasisison an excellent record of past growth, which is considered likely to continue in the future. In some cases also the “investor” may choose companies which have not yet shown impressive results, but are expected to establish a high earning power later (Such companies belong frequently in some technological area e.g., computers, drugs, electronics and they often are developing new processes or products.