{"id":31897,"date":"2012-08-28T01:35:12","date_gmt":"2012-08-28T05:35:12","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/08\/find-out-if-youre-a-speculator-value-investor-or-stock-trader\/"},"modified":"2012-08-28T01:35:12","modified_gmt":"2012-08-28T05:35:12","slug":"find-out-if-youre-a-speculator-value-investor-or-stock-trader","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/08\/28\/find-out-if-youre-a-speculator-value-investor-or-stock-trader\/","title":{"rendered":"Find Out if You\u2019re a Speculator, Value Investor or Stock Trader"},"content":{"rendered":"

By MoneyMorning.com.au<\/a><\/strong><\/p>\n

Finding a company to invest in can feel like you’re on the game show Perfect Match<\/a><\/em>. <\/p>\n

It was a TV show where one lucky individual gets to choose between three hidden candidates for a date based on a short Q and A. The trick is to ask the right questions. And to not get the theme song stuck in your head.<\/p>\n

It’s the same when you’re investing<\/strong>. What questions should you ask the companies you’re thinking about investing in? How do you figure out which is the best fit for you? And how do you shut out the ‘noise’…the distractions that can cause you to make the wrong decision?<\/p>\n

Today’s Money Morning<\/em> is about three types of investor: the speculative investor<\/strong>, the value investor<\/strong> and the technical analysis trader<\/strong>. Each of them uses a carefully thought out strategy to make their buying and selling decisions.<\/p>\n

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So that you can see all three of them in action, we’ve thrown in a mystery stock for them to analyse…<\/p>\n

Which Investor Are You? <\/h3>\n

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Here’s the scenario: the company is recovering from prices not seen since the global financial crisis. It narrowly escaped the mining tax, but the main commodity it mines has taken a breather after a ten-year bull market. <\/p>\n

This year’s ordinary dividend is 17% higher than last year’s, and the company has just issued significant debt to fund operations.<\/p>\n

The Speculative Investor<\/h3>\n

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What would the speculative investor say about such a stock? Well, speculators like triple-digit returns in short spaces of time. Those are much more common with smaller companies. <\/p>\n

Unfortunately, the mystery stock isn’t exactly likely to double in value any time soon. It’s just too big and predictable already. Nothing much unexpected could happen here.<\/p>\n

But speculative investors<\/a> do like resource companies. That’s because the chances of big moves are very high, especially with explorers. <\/p>\n

Most speculators buy into a stock before the company pays a dividend. Speculators are after big gains, so that means buying the stock before the company has made a profit. <\/p>\n

Buying a stock at the early stage of exploration can mean big returns if the company strikes a resource…or it could mean a loss if the company doesn’t<\/em> find a resource.<\/p>\n

In other words, will the company uncover a vast supply of profits, or a bottomless pit of costs?<\/p>\n

But some speculators look at bigger companies too, especially if the speculator can leverage their position using a margin loan, CFDs or options. So if the company is profitable, but it’s just hit a rough patch, it could be a stock worth looking at.<\/p>\n

The Value Investor<\/h3>\n

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How about a value investor? They are more like bargain hunters than gamblers.<\/p>\n

They try and establish a value for a company based on its business. The question is, is the mystery stock a bargain or not? Here’s what this type of investor might look for:<\/p>\n