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     smallworld
Member
Username: smallworld
Post Number: 416
Registered: 01-2004Rating: N/A
Votes: 0
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| | Tuesday, April 25, 2006 - 01:16 am: |  
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There is often a confusion between trading and Investing. In dictionary.com
Invest is to commit money or capital in order to gain a continuing financial return. e.g To Invest in one's education.
Trade is to engage in buying and selling for profit.
Darryl Guppy further proposes that an investor is an asset income manager. He buys an asset such as a house, a share because the assets delivers an income stream.
He further argues that there is a confusion in the current usage of investors and traders because it creates a confusing two way divide. He gave the following examples
The ‘investor’ buys a dividend paying stock at a good price and holds it for the ‘long term.’ He is an asset income manager.
The “investor” buys a stock in a strong industry sector with a bright future. He pays the high price for it because he intends to sell it at some time in the future to collect the capital gain. He thinks he is investing, but in fact he is trading. He buys an item – the share – because he believes that others will want to buy it off him at a later date, perhaps in ‘long term’ for a higher price.
The ‘investor’ buys a stock that was once strong but which has been in a slump for several years. He buys it because he believes the downtrend is about to end as demand for the company products improves, or management gets better, or for any one of a hundred reasons. He buys this bargain because he believes that others will want to buy it off him at a later date, perhaps in ‘long term’ for a higher price so he is prepared to wait. He has no income from the asset while he waits. His profit depends entirely in capital gain. He is trading, not investing.
The ‘investor’ buys a strongly performing stock that does not pay a dividend. It continues to rise in price for a few months, and then it rolls over into a downtrend. The downtrend continues for several years and the ‘investor’ still holds onto the stock. In fact, he might even buy some more because it is now cheaper then when he first bought it. His intention is to sell the stock at some time in the future for a higher price than he paid for it. His profits depends on the difference between his buy price and his sell price. He might believe he is an ‘investor’ because he is dealing with a well known, high profile, well respected listed company, but his purpose is not different from the ‘investor’ who buys a small bio tech company hoping to sell it for a higher price at some time in the future. Both are trading, not investing.
I agree with it upto a certain extent. however, I believe that introducing a third term called speculation would make it easier for us to understand our current division.
So An investor can be a asset income investor or a speculating investor.
A trader of course speculates as well. but traders often process a quality that investors dont rely on, that is traders use processes and systems to continuously generate revenue in a repeatable manner. So are there any non speculative traders. I believe there are, especially when a trader relies more on his systems together with his parameters to give him an edge than the favourable outcome of any particular trade. e.g. arbitrage.
Any thoughts.
(Message edited by smallworld on April 25, 2006)
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kate
Member
Username: kate
Post Number: 296
Registered: 04-2005Rating: N/A
Votes: 0
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| | Tuesday, April 25, 2006 - 07:57 am: |
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Hi Smallworld
I went to a talk where this was discussed and the guy speaking actually asked the audience their definitions of investor and trader. As you can imagine nobody had the same idea, wherein lies the difficulty of trying to define either term. He proposed that (theoretically) they were one in the same thing and that individuals referred to themselves as either trader or investor depending on their personality type.
Regards
Kate
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peter1
Member
Username: peter1
Post Number: 44
Registered: 12-2005Rating: N/A
Votes: 0
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| | Tuesday, April 25, 2006 - 01:07 pm: |
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My thoughts:
An investor buys in the hope that it can be sold at a profit in the future.
A trader buys in the expectation that it will be sold at a profit in the future.
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ingot54
Member
Username: ingot54
Post Number: 1360
Registered: 05-2004
Rating: N/A
Votes: 0
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| | Tuesday, April 25, 2006 - 03:10 pm: |
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An Investor buys, knowing he will receive both growth and income, with little thought of selling in the foreseeable future.
A Trader buys, hoping to sell at a profit, in the shortest possible term, so that he may buy the next stock with the same intention.
Keep Smiling
Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.
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stevo
Member
Username: stevo
Post Number: 348
Registered: 01-2003Rating: N/A
Votes: 0
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| | Tuesday, April 25, 2006 - 03:47 pm: |
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Lots buy without any real idea about when they would sell. A systems trader will know when they will have to exit.
Without a clear strategy people that consider themselves traders are really gamblers. For a trader it's about how they play the game that is important - knowing that they have an edge. Individual trades are not all that important to a trader, consistency of action is. It's the long term performance that determines success.
Investors are a different breed altogether, usually buying on fundamentals, and often with little intention of ever selling. Income streams from the investment are important, rather than capital gains. I can't follow this strategy in the sharemarket, but I can in business.
stevo
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ingot54
Member
Username: ingot54
Post Number: 1361
Registered: 05-2004
Rating: N/A
Votes: 0
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| | Tuesday, April 25, 2006 - 04:05 pm: |
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Suemac raised an interesting point on another thread here, as did Stevo here, further down the same thread.
As well, Spider raised a very strong defining point here,regarding what constitutes a trader - and that is, the trader already has, or should have, a planned exit.
Keep Smiling
Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.
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hilarius
Member
Username: hilarius
Post Number: 1767
Registered: 04-2004
Rating: N/A
Votes: 0
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| | Tuesday, April 25, 2006 - 04:07 pm: |
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Peter1
How precisely do you define the difference between hope and expectation?
Does one have a greater level of certainty than the other?
Is one inferior to the other?
Hilarius
I come in peace to share my thoughts and to shine my candle light on possible long term opportunities
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captain_chaza
Member
Username: captain_chaza
Post Number: 1866
Registered: 02-2003Rating: 
Votes: 1
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| | Tuesday, April 25, 2006 - 04:59 pm: |
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By definition
an investor "Invests" and
a trader "Trades"
There are only 4 actions that can be done
#1 Buy
#2 Hold
#3 Sell
or
#4 Wait
The Investor Buys and Holds for the duration of every horse race each day or for the duration of a Financial year
This Investor is usually trading elsewhere to pay for his Rum and Groceries
The dumb investor will no doubt forgive the management for losing say 1/3 capital base as long as they are handed out gifts from heaven to buy their Rum Rations and a few groceries from time to time
A Trader Buys! Holds! Sells! and Waits! always picking his mark
You could say He/She live upon the sea?
Salute and Gods'Speed
PS The #1 BUY is the same for the Long or Short Termers
The rest is all based on Spin, Excuses and Disclaimers
PPS Since when was a Short term BUY! not a Long term BUY!
PPS Who knows what the future has install for us in the Long Term?
It is hard enough to figure out what is install for us Tomorrow and The Day after??? AT BEST!!!!!
"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.
"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893
"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897
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lafee
Member
Username: lafee
Post Number: 221
Registered: 04-2003
Rating: N/A
Votes: 0
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| | Tuesday, April 25, 2006 - 05:10 pm: |
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Why don't we all invest in ourselves in order to trade profitably?
Why does the word 'gamble' have such bad connotations?
Investors trade, investors gamble
Traders trade, traders gamble
Market participants hate being called gamblers because it implies they don't control the outcomes of trading decisions. While they cannot control the market they can control their personal outcomes.
Classifying yourself as either a trader or an investor will not improve your trading. Only you can improve your trading.
Cheers
Laffee
If nobody can be certain of anything, how can I be certain of that?
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chriso
Member
Username: chriso
Post Number: 52
Registered: 04-2004Rating: N/A
Votes: 0
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| | Tuesday, April 25, 2006 - 08:34 pm: |
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Captain
I agree on when has a short term buy not been a long term buy. All my long term buys started off as short term.
Chris
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stevo
Member
Username: stevo
Post Number: 350
Registered: 01-2003Rating: N/A
Votes: 0
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| | Thursday, April 27, 2006 - 07:37 pm: |
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To quote
"Market participants hate being called gamblers because it implies they don't control the outcomes of trading decisions."
Gambling, as done in a casino, means that the player has little chance of winning because the odds are always in the casinos favour - otherwise the casino wouldn't exist. So why anyone would regularly play a game where it is known that you will lose money over the long term beats me! Maybe they find losing money a pleasurable experience.
So if we call ourselves gamblers then we are admitting that we will lose money! If you trade profitably and have a "proven" track record then you aren't gambling.
We can't control the markets, we don't know what the outcomes will be on individual trades, but we can have a very good idea of long term performance.
stevo
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peterloh
Member
Username: peterloh
Post Number: 1742
Registered: 03-2003Rating: N/A
Votes: 0
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| | Friday, April 28, 2006 - 12:12 am: |
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I invest in international shares by investing into managed funds as I have no idea how international shares will perform from day today, neither do I care.I spread my investment amongst a few fund managers with different philosophy of investing.I would like to know that in 10 years time, it is able to give me an average of about 14% return per annum, I hope.
I trade in Australian equities as I treat it as a stock in trade.The fact that Australian equities pay franking dividends is cream on top of my trading return.I pay daily or weekly attention to my trade and it concern me if the share is too volatile.It demands more attention from me as a trade whereas in my investment I let time/diversification do my risk management for me.In my trade I tend to concentrate on shares that maximise my returns regularly, and any share that I trade, I will sell immediately if it does not meet my requirement.I am less concern on diversification but trade in shares that I have a higher expectations of return. In my investment I set the time frame first and will not do anything till my time for review comes up. In my investment I allow a minimum time of 18 months time frame for it to work.In my trading strategy I am less tolerant with a non performer.Time is not the essence but performance is.
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Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.
The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.
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lafee
Member
Username: lafee
Post Number: 222
Registered: 04-2003
Rating: N/A
Votes: 0
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