Trading Or Investing?

By: ispeculatornew
Date posted: 10.14.2013 (3:00 am) | Write a Comment  (0 Comments)

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stockWhat’s the difference between a trader and an investor? I personally find the debate fascinating and it’s interesting because there is no “right” answer. I personally consider myself a bit of both but I wouldn’t mind being called one or the other. It’s not a big thing. I know of many individuals that get very annoyed when being called these names, especially those that consider themselves investors are end up being called traders.

What Is An Investor?

Here is how I view the difference. To me, an investor is someone who tries to establish the value or future value of an asset and trades accordingly. Investors generally have a longer term perspective. Traders on the other hand are generally very short sighted. They will trade on news, on stock movements, etc. Most traders will hold stocks for a days, a few hours and sometimes dramatically less (most HFT firms hold stocks for a few seconds only). Clearly, traders don’t care much about what something is worth. They care about direction and making a short term profit.

Which Is More Important, Traders Or Investors?

Recently, there’s been a lot of backlash against traders, especially HFT’s. One newsletter that I read, by Jeffrey Dow Jones recently did a very popular interview with an HFT trader which I recommend. I am generally a believer in what they do and think they bring more benefits than downsides to the markets. Are they perfect? No. But they are an important part of how markets currently work. On the other hand, it’s important for the well being of our economy to have capital allocated as efficiently as possible and from that perspective, longer term investors have a critical role. Yes, they need a liquid market where they can buy and sell (which traders facilitate) but in the end, the market’s role is longer term investing.

Which Am I?

I guess in some ways, I’m a chameleon. Most of my assets are invested for longer periods of time, such as my:

-ETF index funds
Ultimate Sustainable Dividend
Long term speculative tech stock picks 

But I also make shorter term picks that while based on valuations, are very short term. It’s not exactly HFT trading but I would still consider it to be much closer to trading than everything else that I do.

I do think most of you are investors but I’d love to hear your thoughts. What’s the difference between an investor and a trader and which one are you?

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