Since the past few months with all of the volatility in the financial business markets, it’s a better time for people to get back to the basics to determine what kind of investors they are. In actual sense the investors falls under three categories that includes, the long term investors, the traders & the speculators.
Most Often, our popular social media and news networks are centered to short-term focus therefore they convey the idea of the trader or speculator to the people everywhere. This calls for confusion among the Long-term investors. Today let me discuss each of the three kinds of investors, along with the different ways which they adopt to interpret in market volatility.
This type of investor stays in the stock market for a long period. They know that the financial status and markets will experience ups and downs over a long haul. They believe that each up market would reach a higher level than the previous one, and it will motivate the investors to invest in the market.
Most Often, Long-term investors have diverse portfolios of stocks, cash, bonds, real estate and few other assets. It helps them to gain smoother rates of return and it also leads them to avoid the need to move in and out of the market at every anti- headline.
The Second category of investors is comprises of traders. Generally, there are two kinds of traders in the Volatility market. Some are those that trade on other’s behalf. Such traders including the Wall Street trading desks that execute trade on behalf of others. The time period for such traders can be in minutes, hours or even days.
Other type of trader executes trading for his personal account. The holding time period for such traders is likely to be more than Wall Street traders, but still quite shorter than the long-term investors.
The third type of investors is made up of speculators. This category of investors will be less likely to diversify and more to concentrate in individual sectors or securities. They might also concentrate their capital in speculative type securities. Finally, they might also tend to take positions with borrowed finances.
Investors should clearly clarify to their advisors that what they are exactly attempting to do. They must define themselves to their advisors that they act as a long term investor, trader or speculator.