Investing or Gambling?

You may think that you are investing, but it may be more like gambling? Many people spend more time looking for shoes or clothes to buy than the studies on which stock to invest in. I'm not sure why this is so, but what I will try to do is to get you to gauge for yourself whether you are investing or gambling .

It is quite possible that you have made in the stock market. Some good money You would have made $ 20,000 in Stock X and $ 10,000 in stock Y. But this was just luck or was it because you had a thorough knowledge of a particular industry? Was it because you are the statistics that the economy drove the company and knew how this company was better understood than its competitors? Maybe you had the most recent annual reports and read with the Securities Commissions, filings listened in on recent conference calls and analyzed the last five or ten years of financial statements? If this were the case, then you are sure of a prudent investor. If not, I think you just got lucky. Let's say you gambled and won!

The "due diligence" steps above are just a few of the things professional money managers do before investing in a stock. Unless you are willing to do, you could take a huge risk with your hard-earned money, take a guess!

Professional investing is just too time consuming, too specialized and too complex to do on a consistent basis by yourself successfully. If you have no time to have annual reports, SEC, the latest analyst reports read, analyze financial statements and ... the list goes on, you could be making a big mistake in being your own investment advisor. 

If you are not going to be what are the alternatives? Your own investment adviser An alternative is to listen to Warren Buffett, the second richest man in the world and probably the world's largest investor will tell you to simply invest in an index fund. This is a fund a portfolio of investments that are weighted the same as that of a market index (such as the S & P 500) to reflect its performance. This basically means that your return is similar to the overall stock market will be. Remember, a majority of the investment funds managed by full-time professional asset managers, not consistently beat broad indexes such as the S & P 500.

If you are serious about your hard earned money and seeking consistent returns, then a bit of work in order. Go back to your investment statements and figure out how much you have invested, over what period and how much you have earned or lost over the same period. This information will allow the return that you have earned calculate. You could then compare the total return of a market index such as the Dow and the S & P 500 and see if you have outperformed the market or not. Be a smart investor - figure out what the rates of return you already earn on your investments and then take appropriate action.

Fauzi Zamir is a chartered accountant and founder of Solutionera Inc., a web site that allows investors to easily track, calculate and compare doing their ROI against market indices without the complicated mathematical calculations developed. You can visit the site at