Trading versus investing
Hi There, I was just wondering what for method for buying and selling (sometimes at a loss) is as a trader? How would this method vary as a long term investor? Nick
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Answer
Nick,
There are a number of moving parts to this great question but I’ll try and answer it as simply as possible:
- Firstly investors and traders alike must identify why they entered a position in the first place – this is true whether people are using technical or fundamental analysis as well as old fashioned “Gut Feel”.
- Hence by definition when the reason (s) has gone the position should often be closed.
- However markets are dynamic and as / when news and prices change the reasons to enter / exit may well also evolve.
- Successful investors and traders can be objective around the above when deciding to take a profit, cut for a loss plus of course increasing a position.
An interesting example would be how MM is tweaking our CBA exposure within our Flagship Growth Portfolio – we’ve been long for over 18-months but recently we reduced our exposure above $106, similarly MM is likely to increase the holding around 6-8% lower. The plan has been “in-play” for a few months and still feels on point i.e. we are tweaking / looking to add alpha around the edges of a core investment position.
