Investment: Useful Question and Answer for Beginner


Here are useful Question and Answer about Investment for Beginner

What is the difference between a trader and an investor?


A trader is an active participant in the trade. Buying and selling instruments for him is a real job. Daily or monthly, but work from which he receives income.


An investor occupies a slightly different niche in the stock market. For him, buying stocks is a form of placing existing capital, not a job. The investor is not faced with the task of earning a conditional amount of money in the market in a short time and withdrawing it. From his point of view, top managers of the company whose shares were purchased on the stock exchange should work. The increase in the issuer’s profit will affect the number of dividends paid and the growth of the market price.

What is the essence of the buy and hold strategy?

This is a fairly common approach among investors. It consists of a one-time purchase of assets and the subsequent long-term retention of these instruments in their portfolio. At the same time, the investor will not close his position, no matter what. No matter what negative news comes out, and no matter how technical indicators “shout”, the paper will remain in the portfolio until the issuer’s physical bankruptcy.

Despite the conditional simplicity of this method, it often outperforms most scalpers and active traders.

The position should be diversified as much as possible so that the investor is not dependent on only one paper or one industry. Closing in profit occurs with a substantial profit (at least 100-300%). The disadvantages of this strategy include the fact that it is completely unknown how long it will take to stay in a position to see a profit.

Warren Buffett, the world’s richest investor, adheres to this view of trade.

What is a PAMM account?

PAMM Account is a special account that is an alternative to trust capital management. A PAMM account is a special account of a trader, into which other people – investors can transfer funds. Profit from trading is distributed in proportion to the contribution. Thus, the trader gets the opportunity to increase the turnover of transactions and their profits, and investors get their percentage of profits, usually 50-70%.

What is the offer of the manager?

Manager’s offer is a list of conditions that a client accepts in order to join portfolio management. Modern trading systems allow even ordinary traders to create their own trading strategies based on the functionality that the broker provides them and make their own offers.

Why do I need an investment portfolio?

An investment portfolio is a well-formed set of various assets that are traded on an exchange. Owning such assets will protect investor capital from inflation and help to increase its savings

What is Portfolio diversification?

Diversification is risk reduction by diversifying the portfolio across various industries, markets, exchanges, and currencies.

How much can I start investing with?

Minimum deposits with most brokers do not exceed $ 300. But for normal trading with low risks, it is advisable to start with the maximum amount for you. This is not just a whim or words, for example, as it affects the risks of binary options. If the minimum transaction is 25 dollars, then with a deposit of 100 dollars, you can open only 4 transactions. If you have a deposit of $ 300, then you will be ready for 12 transactions. This does not mean that you need to open transactions at the same time, but it shows the essence of your risks in case of unsuccessful transactions, that is, the ability to continue trading without reducing turnover at the first loss.

To reduce risks and diversify in the stock market, the optimal amount is from 5,000 to 10,000 US dollars or their equivalent.

What are investment ideas?

An investment idea is a subjective vision of a group of analysts or even one specialist regarding the future development of prices of certain instruments on the market. Such information may be provided by analytical agencies, a broker and ordinary investors.

Most often, this is technical or fundamental information based on some statistical facts that have already been published. For example, rising unemployment in the United States Adversely affects the stock indices of the United States.

Therefore, under this news, you can open short positions on US indices or stocks. It is worth noting that most of the ideas distributed free of charge do not carry any practical value and can lead to serious losses in the investor’s portfolio. Also, the creators of such forecasts are in no way responsible for the consequences of their assumptions.

Why invest if you can trade on the exchange yourself?

If an investor has at his disposal a working business or occupies the position of a highly qualified specialist, then it is much more profitable for him to continue to engage in his core business, and transfer the accumulated capital to the management of specialists who have extensive experience in the market.

Many people mistakenly believe that trading on the exchange is not something complicated. Even more widespread is the misconception that official work and active trading can be successfully combined. This is not the case. If a private investor starts earning money on the exchange, it will take 90% of his time, which will make it impossible to continue the main work.

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