Just what is the difference? When I refer to “traders” I am talking about the person that makes their living off of the profits (or losses) that come with trading stocks or bonds. Granted there is a big difference between a trader on the floor of the New York Stock Exchange and a day trader sitting at his kitchen counter trading online. But their intention is similar, make a profit off a trade today. Investors…. well those are the guys (or gals) that are in it for the long haul. They are looking for a profit ten or twenty years from now. I like how Investopedia.com differs the two: “The main difference between a trader and an investor is the duration for which the person holds the asset. Investors tend to have a longer term time horizon, whereas traders tend to hold assets for shorter periods of time in order to capitalize on short-term trends.”
The average audience of this blog is individuals who are saving for their retirement and trying to plan for their family’s future. If your main asset is the investments in your company retirement plan and your are trying to be a trader with that account, STOP. There is a better way. If you are an individual investor and you want to try your hand at trading stocks, by all means give it a go. But give yourself some limits. Years ago I had a retired elderly lady as a client that loved to watch CNN and trade stocks she heard about in the news. Her husband had predeceased her and left her a tidy sum in municipal bonds that I helped her manage. As time went by she began to liquidate more and more bonds to trade stocks. After several losses we had a conversation about how much she was spending through trading. She understood the risk and liked the idea of trading stocks. In that respect, she was a “trader”. To stabilize her cash flow, I suggested that she set some limits on how much she would obligate to trading. If she made profits, that was great. But if she had losses, she agreed not to dive into here municipal bond accounts to make more trades. She would wait until she had the liquid assets to do so. It is like walking up to a slot machine and putting in the change you have in your pocket. If you lose, walk away. Don’t empty your bank account to feed the slot machine.
If you like trading, don’t try to do it with your company retirement account. Be an investor with those funds. That doesn’t mean to never sell an investment. But set a strategy for your retirement savings that focuses on your long term goals. ere Here is an approach that has worked for many investors over many years.
- Define your retirement. Not all people see retirement the same way. Some may never retire. Some may want to travel. Some may want to change careers. There is no wrong answer. Making a plan will give you more control over your life today and in the future.
- Plan on how you are going to get to where you want to go. What will be your sources of income? In all of your plans expect to be flexible. Understand that in all that you do, the end result will be harder than you expected and it will probably take longer than you thought. This doesn’t apply to just retirement planning but all of life!
- Make an investment plan. You know what you want, you know some of the sources to use, now plan on how to make your investments. What is your time frame? What are the risks you will face? How will you manage or tolerate the risk?
- Check in at least annually to see how you are doing. Early 20th century humorist, Will Rogers, was in 71 movies and wrote over 4,000 newspaper columns in his life. He knew how to plan and get things done. He said “Even if you’re on the right track, you’ll get run over if you just sit there.” Advice that will serve you well in planning your financial future.
Securities offered through Triad Advisors, Inc. Member FINRA, SIPC
