The similarity between what investing for the long term and trading is that they both face the same risk in the market. Since both the investor and a trader face the same market risk, we have to analyze which of the two technique is more advantageous than the other.
When an individual invest for the long term, they put their money in a mutual fund that is safe. Their investments go through easy and difficult times in the market until the investor is ready to claim it. It has been proven in recent times that mutual fund drain a lot of fees for management.
When an individual long-term investment starts going through the tough time in the market, the investor will watch from the sides, hopeful that the tide will subside and their paper loss will be recovered. The investor will begin to worry and fuss around, but won’t have the mind to pull their investment out of the market as it would further galvanize their loss.
Most investors are in this situation because they were advised that investing for long haul is for individuals that are wise and trading is for individuals who are gamblers.
The difference between a trader and investing for a long haul is that a trader plans for both the easy and tough times in the market. An individual that trades daily plans his entry and exits before putting his money in a stock.
A day trader is always alert and has his eye in the stock market to constantly check for emerging new opportunities. A day trader uses the current events and quick thinking to make a bucks. After all, what really matters is you profiting in the market and not trading or long term investments. If you have the time and inclination, why not learn both, where the majority of your money is in investments and some money is used in trading?
Here are 20 investing and trading books you must read.
Max Keene (SuperStocks28 staff)