{"id":2196,"title":"Strategy – Are you a Trader or an Investor","publisher":"Share Talk","author":"sharetalk","published":"2016-03-23T19:09:13+00:00","modified":"2017-10-23T12:50:44+00:00","canonical_url":"https://www.share-talk.com/strategy-are-you-a-trader-or-an-investor/","markdown_url":"https://www.share-talk.com/strategy-are-you-a-trader-or-an-investor.md","json_url":"https://www.share-talk.com/strategy-are-you-a-trader-or-an-investor.json","category":"Financial","categories":["Financial"],"featured_image":"https://i0.wp.com/www.share-talk.com/wp-content/uploads/2023/11/Stencil-Google-Chrome-2023-04-19-at-2.47.43-PM.jpeg?fit=1231%2C615&quality=89&ssl=1","format":"news","language":"en-GB","content":"There are a lot of labels in investing.  I spent part of yesterday listening to a 4 person panel of “value” investors in which one “deep value” investor spent a chunk of time suggesting that none of the others were in his opinion really value investors. This did not sit well with the other members of the panel.\n\nI raise this not to get into a big discussion of the broad swathe covered under the umbrella value but because I did agree with one point that came out of the labels they were all trying to pin on each other.  This is not what you want to call yourself or even what you should have as your approach but instead the fact that no strategy has ever been proven to work all the time but you need to have an approach that you can stick to as jumping around trying to find the approach of the day will not work. Whenever you hear of a genuinely successful investor they have had an approach that they have applied over time.  Often that approach has evolved but I am not aware of anyone great success where the investor has chopped and changed their approach day after day.\n\nThere are a lot of successful investors. There are also a lot of unsuccessful investors. Knowing what type of investor/trader you are could make a big difference not only to your returns but also to the enjoyment you get from those returns. You are investing to improve your financial security and make your life more enjoyable so your strategy absolutely has to let you sleep at night. If it causes you to sit up at night worrying then it is not worth doing. If it causes you to sit up at night researching shares then that is a different issue.\n\nI do not believe there is a single correct way to be in the market.  Long side, Short side, Momentum, GARP, Dividend, Schloss, Buffett, Deep Value are all ways you can make money.  Highly focussed or widely diversified.  More intelligent people than me have made millions from all of these non complementary strategies. But I do think there are strategies that best suit your temperament and your risk profile and that let you sleep at night without worrying overly about your position.  Investing is a serious business but that does not mean it should not be fun and that you should not enjoy the process as much as the reward.  At the absolute core be as honest with yourself as you can be.  I knew one professional fx trader who had to have a live position on to be comfortable.  Being all cash is anathema to him.  I know of a private investor who only trades in 10 firms, all of which he has followed for years.  If the price goes above his sell price he will be 100% cash and happy to be so.\n\nI would suggest that the first question you need to ask is are you an investor or a trader.  I would put the difference as an investor is looking to by an asset that has an intrinsic value stream.  This stream can be ascertained (to an extent) and a value put upon it to derive a value, or range of values, of the investment.  A trader is not that worried about the value stream, he or she is simply looking to buy an asset and sell it for more to someone else, not because the asset has changed value, or that the value has been seen to be more, but because someone will pay more for it.\n\nIt can however be quite hard to properly answer this question.  Increasingly there are investors who follow a level of Momentum.  Patrick O’Shaughnessy, the son of James O’Shaughnessy (What works on Wall Street) a famous quantative value investor has done a lot of back tested work and believes that a 70% value / 30% momentum portfolio will maximise.  To my mind a Momentum strategy is an expression of buying for a bigger fool, not underlying value and therefore trading .  But when one of the foremost value firms advocates the strategy there is clearly a blurring of techniques.\n\nThe second question you need to answer is how much work do you want to do or indeed can do.  If you only have an hour a week for investing you need a strategy that fits.  Equally if you do not know what a DCF is, or indeed do not care, then your strategy needs to reflect this.  With the current availability of financial websites and the ability to stock screen it is possible to fit almost every investment methodology into both your time available and your knowledge levels but only if you recognise your limitations and act accordingly.\n\nWhat you call yourself is unimportant and how this fits into the general terms used in the market also doesn’t matter.  But to invest or indeed to trade well you need to know how you are going to invest, why you are investing and what you are trying to achieve.  Remember the market is not interested in the return you want, that is not the way it works.\n\n![Linking Shareholders and Executives :Share Talk](https://www.share-talk.com/img/logo.jpg)\n\n[Terms of Website Use](https://www.share-talk.com/terms.php)\n\nAll information is provided on an as-is basis. 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