In this world, we 'trade' almost everything daily. We can 'trade' our assets (such as time, properties, skills) for money; so that we can use the money to 'exchange' (or 'trade' our money for) what we want. In order to 'trade' our time for 'better price', for instance, we need to tell and show our prospective customer (such as, employer) about why we worth this price and what we can do for the company. Thus, it is considered as a strategy to add-value to our assets.
The similar thing happens in stock trading. There are two business strategy can be used to 'add-value' to our shares so that we will got profit from a trading:
Invisible valueFirst, let our prospective buyers realise or be convinced that they should pay a higher price for our shares because the future of a particular company is bright. But the question is if the future of the company is bright, why there are sellers who willing to 'cheap sell' their shares. Well, there are many reasons to explain this kind of phenomenal in stock market. Maybe somebody needs money suddenly; maybe somebody does not 'buy the stories'; maybe the price is already over-valued; maybe... the worst case... it is a trap!!!
Cost and profit marginSecond, we need to reduce our 'cost' (buying price) that subsequently improves our profit margin. In fact, it is just like good business people, investors should capable of 'recognizing' and 'acquiring' good product with low price to make the profit attractive even with a reasonable selling price.
Touching story + Good feeling = high value-addedI must highlight that both methods are capable of achieving attractive profit from 'the trading'. The first strategy is quite common in our socially today. For example, a salesperson tells you a "touching story" that could ultimately make you 'feel good' and willing to pay higher price for a normal product.
Hope or DreamAnother slightly extreme example is to sell 'hope' to people. As we know, 'hope' does not have any tangible value (it may have intangible value). Since the cost of a 'hope' is probably very low, huge profit can be generated, if and only if, people willing to pay for them. For example, when somebody tells you that XXX stock will raise. If you buy it now, then you may earn 10% tomorrow. What is good deal, isn't it? No, it is just a good dream. Will the dream come true? Who knows. But I am pretty sure that the dream may come true.
The second strategy is commonly applied by honest business people. They are normally very hard-working and put lots of effort to reduce their cost so that the price of their products is reasonable and competitive.
Personally, I prefer the latter because I do not like to pay expensive price for a good dream that may come true. That's all for today. More fascinating articles and sharing will be updated from time to time in Xaivier Blog. So, you are welcome to subscribe our feed, look at our sitemap or simply visit our Homepage for latest sharing.
Written by: Xaivier Chia
(P/S: The above sharing is solely based on personal insight. Please do not take it seriously. However, your valuable feedback are very welcome.)