Seed investing vs angel investing for making profits in the share market
Many investors and analysts, whether professional or casual, tend to categorize the stock market players as investors or traders.
The focus of this article is on those individuals who identify as seed, a term that loosely translates as traders in stock markets. But also Seed Investing vs Angel Investing could be classed as the same or very simpler.
Both Seed Investing vs Angel Investing in most cases will be looking to invest in startup companies at the very early stage so that they have a chance to maximize profits in the long term.
Seed Investing vs Angel Investing
When you talk about Seed Investing vs Angel Investing, Seed investment can be defined as the purchase of stocks by individuals without any prior experience in reading market charts or assessing company fundamentals.
This is done in expectation of profits, hence the common term, “Seed investing“.
This type of investing has been gaining momentum over the past few decades due to the ease of online trading that has made such activities much easier than in the past.
The basic assumption behind the term “seed” investing is that the individual, when starting out with the stock market, is unable to read market charts and assess the financial standing of the company they are investing in.
They rely solely on company information on which the share price is formed. Thus, “seed” investing is a theory based on the theory that the individual will be able to profit from their investment if the share market trend is in their favour.
In other words, if the shares price goes up, the individual will make a good profit, if the shares price falls, the individual will make a good profit.
“Seed Investing” has a disadvantage compared to “seed” investing, however, the potential for high profits is so great that it compensates for the lack of knowledge.
Thus, the term “Seed Investing” refers to the investment practices of individuals who rely on the principles of fundamental analysis and technical analysis to make informed decisions on what shares to buy and what to sell.
Valuation Methods And Ratios
The primary considerations are the company fundamentals, such as financial standing, market trends and stock price. Secondary considerations are the valuation methods and ratios applied in different parts of the market.
These individuals, mostly new traders, have to read market charts and identify the prevailing market conditions to buy and sell shares. They do not consider technical analysis as an important aspect of investing.
This is because of a lack of familiarity with technical analysis and lack of familiarity with various valuation methods applied in the share market.
In this era of internet technology, the degree of risk has decreased, the online brokers have considerably enhanced the opportunities and the investors have increased their return.
Hence, it is a wise decision to invest in shares, provided you familiarize yourself with various valuation methods applied in the market.
These methods have a great effect on your return and hence, they are important aspects of investing. One must acquaint himself with all the valuation methods applied in the share market to get a holistic picture of the company, its earnings, its future prospects and the market trends.
This will aid you in making informed decisions on what to buy and sell.
Aspect aside, the most important part of the investment is when you invest.
Presence In The Market
Companies to invest in have a constant presence in the market. If a company has regular market trends, one must always be on the lookout for its sales figures and must follow up the trends in the market to know the precise time to buy or sell its shares.
These trends help investors identify which company’s shares are highly likely to go up in the future and this helps to make a sound investment decision.
The company to invest in should also be considered for the long term prospects and its earnings should be considered.
Earning of a company should be considered not only because it is the key factor to consider its stock price but also because it also determines the future of the company and whether it can meet its debt and financing obligations.
Earnings of a company are the profit/loss after making revenue, all expenses and any gains from sales. These earnings are the dividend and royalty income and also the profit of the company. A company with good earnings should be considered as a good company to invest in.
It should have a growth rate of about 10 % in earnings year over year. The earnings of a company will grow at a faster rate if the company is more likely to succeed in the near future. If the company is not likely to succeed then its earnings will not grow at a fast rate.
If the company’s earnings are declining then investors should be careful because it could signal the potential of the company to decline in the future.
Companies In Its Sector
Earning should be a critical factor when deciding a company’s stock price because if a company’s earnings are declining then it suggests that the company has things worse than other companies in its sector and it has not been able to make results for the last few years.
It suggests that the company has fallen behind and is not able to catch up with competitors. A company that earns less than an expected year after year makes it more likely to fall into financial trouble in the near future.
When it is possible to find good companies that show good earning year after year, then investors prefer to invest in them so that their stock price is higher than expected.
When a company’s stock price is higher than expected, then people say that the company is likely to succeed in the future because of its good earning performance.
The key to success for companies is to earn big profits year after year and if this is not possible, then it becomes more likely to fall into financial trouble in the near future.
It can be a good idea to look at the stock price of all the companies in a sector because each company is a good candidate to earn money in the future.
In my opinion, I prefer angel investing early on in the startup’s journey, But the best stocks to invest in are those that have been in business for at least five years and even then, only invest in those that have a long history of profitable performance. I hope this post kind of assisted in some way in your interests to Seed Investing vs Angel Investing.