It’s a question most people would instinctively answer, YES.
After all, that’s how all the famous multi-millionaire’s made their fortunes, isn’t it?
Through trading stocks and shares?
Well, actually, no, strictly speaking it wasn’t through trading.
But hold on, aren’t trading and investing the same thing?
Again, most people think they are but in fact there is a major difference between trading and investing.
- Trading is about making profits faster, in the short-term
- Investing is about building wealth over time, maybe 5, 10, 20, 30 years, taking advantage of compound interest
Hence, the majority of multi-millionaire’s of the past and present focused on investing, rather than trading.
Just name check any of the richest people on the planet and they will all have that one thing in common – they made their wealth over time, through investments, careful risk management, and proven strategies.
Warren Buffett is the most famous investor, arguably of all time, and he is famous for many great investor insights, such as:
“If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
Of course, Mr. Buffett doesn’t literally mean wait 10 years before selling to make a profit if the time is right.
The point he is making is that you shouldn’t hold a stock for a short period of time if you are not willing to hang on to it for a long period of time.
In other words, he is talking about investing in fundamentally strong companies because his #1 Rule to Investing is: Never Lose Money.
Rule #2 is – Never Forget Rule #1!
When you are trading in the short-term, from day-to-day or even minute-to-minute (as professional Day Traders do) your chances of losing money are far greater, because basically, it is riskier.
Investors like Mr. Buffett focus on building their wealth, growing it.
And they do that because they know they will make more money that way, over time.
Mr. Buffett also said:
“My wealth has come from a combination of living in America, some lucky genes, and compound interest.”
You can see how this works here with this compound interest calculator:
Serious investors also know the value of disciplined money management.
Because that too makes you more money, helps grow your wealth.
And you can bet his bottom dollar, he doesn’t lose any sleep over his investments.
Who wants that in today’s fraught economic circumstances?
No one in their right mind, that’s for sure.
So, can trading make you rich?
In theory, yes.
In practice, it is not very likely.
And it takes a lot of damn work!
There are various forms of trading:
- Swing Trading
- Position Trading
- Algorithmic Trading
- Day Trading
Swing Trading – or Active Investing as it is also known –is regarded as the best for beginners.
This involves checking the market every day after it closes or first thing the next morning.
You do this to look for movements up or down that in turn provide you with the signal whether to invest or sell.
This can take as little as 20 minutes a day, if you know what you are doing and have proven strategies to use.
When to take action will depend on the state of your “positions.”
You have a “position” when you have acquired a stock or other trading asset.
The action you take is all down to you and part of the skill you acquire if you have learned about trading investments.
So, it is ultimately down to you to decide whether you have the time to devote to this kind of trading and investing, or not – for even as little as 20 minutes.
It is still a commitment you need to make if you want to succeed.
When you learn about investments, you will quickly understand that investing involves riding out the market dips and not panicking.
You’d also be using something called “stop-loss” orders to help minimise losses.
These basically put a halt to any position you have that may be about to lose at a predetermined price level.
The level is usually set so you never lose more than 1%, while the minimum profit is always 3%.
It’s what is known as the 1:3 risk-reward ratio.
It’s about “building wealth.”
The more pragmatic question really is, can investing help me grow my wealth?
That is a definite, YES.
We have been doing it for years here at Investment Mastery as active investors and so have thousands of our students who have learned how to do so.
They are only doing that and being successful because they have LEARNED how to make the most of the strategies and tools we have provided them with during their education.
To be frank – there is nothing stopping ANYONE becoming rich through successful active investing/trading.
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