Aug 10th, 2009
Out of Nowhere: the Difference Between Investing and Trading
I often wash my truck in a public park, largely because it’s a nice break from home. I was doing so today, listening to a broadcast of Bob Brinker’s Moneytalk (a show I often listen to and like but don’t think I’d say I recommend), when I was approached by a stranger asking me what station I was listening to.
“AM 690,” is what I said, while continuing to wash away.
“Do you trade stocks?” she asked.
“No, I invest in stocks. I rarely sell, and I wouldn’t consider myself a trader, but an investor.”
“I want to learn how to trade stocks,” the stranger continued. “Do you know someone who trades?”
“No, I don’t,” I said. The stranger thanked me for giving her the information on the radio station and went on her way.
This got me thinking about something pretty basic, at least in my mind: there’s a fundamental difference between an investor–someone who puts money away for the future in known high quality vehicles such as low cost index funds or stocks of companies that are profitable and have a long, positive track record–and a trader–someone who puts money into a stock and quickly takes it out when they think they’ve made what they can out of it.
I can’t speak for everyone who reads this, but I’d like to think those of you who read what I write are much more likely to be investors than traders. Are you?
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