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Sunday, 4 March 2012

Traders and Investors – Ebony and Ivory

Traders

When I think of traders, I am reminded of this mental image of the Arabian traders from the 101 Arabian Nights.

Their final destination may be Cathay (China), to source for silk, porcelain, tea, etc.; but the journey is at least a year or more away. To sustain their livelihood along this arduous trek, traders have to set aside a portion of their merchandise for trading with the next village, town, and fortress.

To know what to buy and to secure a good price for their merchandise, traders have to anticipate what the people of the next destination would buy and pay for.

Everything is for sale! There is no emotional attachment to their merchandise.

If a mistake is made, traders know the first mark-down is the least painful. The longer they hesitate, the bigger the mark-downs they will have to endure. It’s pointless to drag along merchandise that nobody wants through the whole journey. Talk about dead weights! 

The focus is not what the traders themselves liked; but what others would like. 


Investors

When I think of investors, the image of parents raising their child comes to mind.
Like all proud parents, they would direct their hopes and aspirations (or failed dreams) to their child.
   
Some parents dream of their child growing up into a bright, successful, and respected adult. Whatever the child needs: ballet, violin, or overseas education, these parents will “invest” in the child’s call for more funds. No expense is too much.

Some parents can’t wait. They prefer to adopt grown-up “children” who from the get go can return their “love” with immediate monthly parental allowance. 

If the relationship sours – the child not living up to the parent’s expectation – one group of parents would disown the child and move forward, while the other group would cling on to the failed relationship and play “victim”.

And if the child exceeds or performs to expectation, now why would any parents “let go” of this child? 

The focus in what the investor want out of this investment.


How to tell which is which?

A good example is when you bought your place of abode. Do you visualize how you can renovate and decorate this place into your personal sanctuary, or do you spend more time checking out the features and selling points that might appeal to the next buyer?

Younger readers may want to infer from your purchase habits – like buying the latest smart phone, branded handbag, or car - which comes to mind more? Is it your personal enjoyment or the 2nd hand resale value?  

OK now look at how you “trade” or “invest”. 


Ebony and Ivory

Does it matter what we call ourselves?

Not really; but to some individuals – everything!

A trader who constantly gets married to his positions and projects his hopes and dreams to his trades…

An investor who can’t seem to sit tight through the volatility and refuses to recognize the reasons for investing in the first place are no longer there…

And then there are musicians who can make great music from Ebony and Ivory:




The right question is perhaps not whether it’s better to be a trader or investor? A better question could be: 

a)    Are you a good or bad trader?

b)    Or are you a good or bad investor?

13 comments:

  1. Who am I? Trader or investor? How to know?

    ReplyDelete
    Replies
    1. CW8888,

      You are a great fisherman! You know how to sit tight tight. Or credit should go to your underwear?

      I don't want to know!

      LOL!

      Delete
  2. yes, it does not matter what we call ourself. but it does matter what we did to our trading or investing.

    why does so many investor lost money? one main reason is that they turn their investment into trading without even realising it.

    my quest is to find out can a good trader be a good investor (or visi versa) at the same time. can the 2 strategy and mindset merge into one.

    so before i can find out the possibility, i must know the differences between them, thought i have a good idea of it.

    so it does matter to know what you are doing, trading or investing.

    ReplyDelete
    Replies
    1. Coconut,

      I would think it helps to know what you are doing.

      But then, some of the greatest creative works were inspired with the help of a little pharmaceutical and/or alcoholic "enhancements".

      Sometimes it helps to know not what we are doing ;)

      Delete
    2. you know, something tells me that you are right, at least partially.

      may be is part of investing mindset. pertaining to what you own or buy as long as they gives stable return over the long run.

      Delete
  3. {But then, some of the greatest creative works were inspired with the help of a little pharmaceutical and/or alcoholic "enhancements".}

    Ha! Ha!
    Our famous Chinese by the name of Li BAI was such a person. i wonder i can borrow his style but become creative genius in the stock Market instead in the Letters. Do you want or dare to try? Ha! Ha!

    ReplyDelete
    Replies
    1. Temperament,

      I was thinking of the Beatles (yellow submarine) and Li Bai when I wrote that statement.

      LOL!

      Delete
    2. i think creative and immaginative minds are great help in the stock market.

      Delete
  4. Oh Dear! Oh Dear! No wonder they say, "Great Mind Think Alike", must be true. Ha! Ha!

    ReplyDelete
  5. Couldn't agree with you more!

    Traders need to be disciplined in cutting losses.

    Investors need to do their homework about the company even before they buy a stock. And if the fundamental dun change, they should ride it through.

    ReplyDelete
    Replies
    1. Thanks Anon 10:17!

      It's nice to get feedback :)

      Delete
  6. Hey SMOL, I like this post of yours. I think you need to be a trader and investor both at the same time. An investor when it comes to patience and a trader when it comes to discipline hehe....

    ReplyDelete
    Replies
    1. Thanks Macroanalyst!

      It's refreshing to know that people still read some of my old posts ;)

      Yup, the patience of an investor; the discipline of a trader!

      Delete

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