Investing vs. Trading Who Cares Anyway
Below is a MRR and PLR article in category Finance -> subcategory Investing.
Investing vs. Trading: Does It Really Matter?
Summary
Steer clear of the "long-term blinders" that can hinder your investment growth.
Main Article
The mutual fund industry thrives on customers buying their funds and holding onto them indefinitely. Unsurprisingly, there's a lot of editorial content discouraging trading, market timing, or reallocating that involves selling mutual funds. This insistence becomes more absurd and hypocritical each year as new scandals involving brokerage firms and mutual funds emerge. Interestingly, the professionals managing these funds engage in daily trading, market timing, and reallocating. Yet, we're told that doing this independently will ruin our portfolios.
The outdated notion propagated by mutual fund marketing is that investing must always be for the long term. Phrases like "It's okay if your investments are going down because these are long-term investments" can actually undermine portfolios and compounded returns.
In my opinion, investing is simply slow-motion day trading. People who lack an investing plan often use the excuse, "I'm investing for the long-term." However, the rules that apply to professional currency traders also hold for small-scale mutual fund investors. If a mutual fund owner considers their actions as mere investing, they may feel exempt from the necessary decision-making involved in ownership, forgetting that every structure requires maintenance.
Let's explore the concept of maintenance. Consider a home: everything from appliances to roofs needs attention. The same applies to rental properties, strip malls, airports, manufacturing plants, and every business entity. So, why would your investment portfolio be any different? It requires maintenance, despite long-term investing theories and warnings from brokers or headlines. Most of your investing time should involve this essential maintenance.
Maintenance involves continuous review, evaluation, and alignment with your goals. It's about ongoing assessment: Is your portfolio meeting your expectations? Maintenance includes keeping abreast of changes in market views, interest rates, inflation, recessions, industry shifts, and new legislation. It also entails reviewing your portfolio. For instance, if real estate surges unbalance your portfolio, you might need to sell weaker assets or offload strong holdings if market prices begin to fall. Maintenance also involves setting up alerts?"be it for stop-loss orders or profit targets. It could be something as straightforward as a monthly review to ensure stocks remain above their 200-day moving average.
Whatever approach you choose for investment and portfolio maintenance, start by creating your own trading rules and checklists. Decide on criteria for entering and exiting trades. Keep a journal to evaluate how your rules impact your account and pinpoint areas needing updates or eliminations. This maintenance is essential?"even for a $25 investment?"so it doesn’t diminish to $0.25 due to neglect.
To the saying "A fool and his money are soon parted," I would add: "An amateur investor and their long-term investments are soon parted." Those unwilling to perform ongoing investment duties seldom perform well. Meanwhile, a professional trader who diligently analyzes and adheres to trading rules can expect continual portfolio growth.
You can find the original non-AI version of this article here: Investing vs. Trading Who Cares Anyway .
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