Today I am fortunate enough to have a glimpse of my ideal life.. Right now I am blogging on the balcony of my hotel suite overlooking a wonderful lake. I will be then trading the stockmarket later for 1 to 2 hours to make more than what most people earn on a whole day's work. I think I wanna go horseback riding tomorrow after I ride the nearby zipline.. nice!
I had a realization the other day that markets were exactly like elevators.. but with no signs that say if it is going up or down. it can only say what floor it is on. Now, how would you manage to get around with such an elevator.. THINK and THINK hard!
Ever since I started in the stockmarket, I have been trained to trade, not to invest. This is due to the fact that I work for a brokerage firm and commissions must be generated not only via capital gains but also via trading volume and activity. Risks are also minimized, in my opinion, when trading as opposed to investing. So what is the difference between trading and investing? I'll list them down for a better feel..
1. TIME - Traders buy and sell on a short term time frame. Their holding period is from a few days to a week as opposed to investors' time horizon of months to decades (think warren buffett).
2. PRICE - Traders buy or sell based on price action. Traders usually dont care about the price per se, as long as they see higher prices coming by way of price action then they take positions as needed. Investors are more concerned about price levels, they look at valuations and ratios of companies as businesses and their potential over the long run.
If you have unlimited capital and time, i suggest you go for long term investing just like Warren Buffet but otherwise, trading is my favored way to grow capital. As proof, just look at the Dow Jones Industrial Average, as of this writing, it is approximately where it was A DECADE AGO! now if you invested in those "blue chips" a decade ago, you would've still lost money because of inflation..
wait for my next post on stockmarket investing, we're getting hot!