Are You A Trader Or An Investor?

In one corner you have traders, in the other, investors. These labels are often used interchangeably. Both participate in the stock market but that's where the similarities end. These are two very different groups, with very different outlooks.

Timeframe

Traders has their eyes on the now. They frequently buy and sell stocks, aiming to profit through short-term price movements. Taking positions day-by-day, even minute-by-minute.

An investor is agnostic to short-term price movements. They see themselves as business owners, investing in companies with long-term growth potential. Operating in decades, not minutes.

Passive investors own thousands of businesses across the globe through ETFs, expecting businesses (as a whole) to grow over time.

Traders are sprinters, investors are marathon runners.

Market Timing

Traders must make the right trades at the right time. Their concise timelines creates a high pressure environment where everything must line up. The stock market is notoriously unpredictable so this is a tall order.

An investor buys when the market is strong, buys when the market is weak, and buys when the market is neutral. It doesn't matter to them. A long timeframe allows for patience.

Effort

Trading is an ultra-competitive discipline. In order to have a chance of succeeding, a trader needs to live and breathe the market. Exerting enormous effort to research companies, monitor price movements, frequently trading, and using complex strategies. There are no days-off, something is always happening, even when the market is closed.

An investor doesn't need to do much. Once they have a risk-appropriate portfolio set up, all they need to do is keep investing. Investors can ignore the daily market noise and enjoy returns over time.

Results

Traders aim to buy low and sell high, but history shows us that most do the opposite. Year after year, active managers have failed to beat the market, and studies have shown that the more trading one does, the worst they do.

Investors won't get rich overnight, but if done correctly they will at the minimum be able to match market returns over time. Allowing them to grow their money in the long term, beating out most active traders, with little to no effort.

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