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Investor or Trader? Why Defining Your Style Is Paramount to Success
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We are all human and experience emotions. In the world of investing, emotions can be our worst enemy.
The only way to combat our emotions is to employ a set of rules that we can operate from with a clear intention and stated goals. At one point or another, we are all eventually faced with defining our individual investment goals. Do we see ourselves as an investor or do we view ourselves as a trader?
Defining Our Approach
Being unintentional with our approach to the markets can have serious implications that will almost certainly be detrimental to our investment outcome. Some people have a personality best suited for trading, while others prefer a longer-term investment approach.
By failing to define our plan, we are nearly guaranteed to experience inner conflict when the time comes to make key investment decisions. These decisions all revolve around buying, selling, and holding. Without a clear plan, it simply won’t be easy to make these three decisions in the heat of the moment.
All investors and traders have experienced some form of regret. This may come in many forms. Have you ever thought to yourself ‘I should have bought earlier’ or ‘I sold too soon’? Of course you have. Everyone needs to ultimately make a choice – which style is best for you?
This is why it is absolutely essential to focus on a particular style and stick to it. Deviating from our plan is a recipe for disaster. Focusing on one style necessarily involves sacrificing other investment approaches. Once we clearly define our investment or trading objectives, it becomes much easier to stick with your plan and ultimately achieve success.
Know Thyself
We want to develop a strategy that works for us individually. What may work for you personally may be different than what will work for your neighbor. It all comes down to risk – are you able to stick to your plan during the most volatile times? A sound strategy would be to model the successful strategies of past investors or traders who have a history of outperforming the market. Even with this strategy in hand, realize that it won’t work out in every trade or investment but will work over time.
You may favor buying and holding stocks for several years at a time, placing your investment capital into ETFs or mutual funds and simply ride it out during the good times and bad. In this case you would be considered a long-term investor. Even most professional money managers have trouble beating the S&P 500 (SPY - Free Report) index each year, so for most people this is the best way to go.
If you prefer to commit your investment capital for shorter periods of time, you’re likely to be considered a trader. Intermediate-term traders typically commit capital to trades for a period of a few months up to one year. Intermediate traders seek to benefit from favorable market periods and get out of the market during the unfavorable periods. Shorter-term traders are involved in trades that are usually less than two months; swing traders typically fall under this category, as well as day-traders which are an extreme example and move quickly in out and out of the market in a matter of minutes.
Setting Goals with Zacks
Fortunately for both investors and traders, we here at Zacks provide you with a host of varying longer-term investing as well as shorter-term trading services designed to fit your personal goals. You can view a complete list of our services here.
Most people prefer to ‘set it and forget it’ when it comes to investing. They follow a detailed investment plan set forth by a financial professional in an attempt to achieve their financial goals. They have so many other things going on in their personal lives and don’t have time to pay attention to the daily market fluctuations or perform the daily research it takes to be a successful trader.
Some readers may opt to have long-term investments that they don’t have to devote too much time to, but also have some spare time to devote to shorter-term opportunities. These people may have the capacity to blend investing and trading styles. If you find yourself falling under this category, our Zacks Ultimate service may be your new best friend.
Regardless of which approach you prefer, it is vital that you stick to the plan.
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Investor or Trader? Why Defining Your Style Is Paramount to Success
We are all human and experience emotions. In the world of investing, emotions can be our worst enemy.
The only way to combat our emotions is to employ a set of rules that we can operate from with a clear intention and stated goals. At one point or another, we are all eventually faced with defining our individual investment goals. Do we see ourselves as an investor or do we view ourselves as a trader?
Defining Our Approach
Being unintentional with our approach to the markets can have serious implications that will almost certainly be detrimental to our investment outcome. Some people have a personality best suited for trading, while others prefer a longer-term investment approach.
By failing to define our plan, we are nearly guaranteed to experience inner conflict when the time comes to make key investment decisions. These decisions all revolve around buying, selling, and holding. Without a clear plan, it simply won’t be easy to make these three decisions in the heat of the moment.
All investors and traders have experienced some form of regret. This may come in many forms. Have you ever thought to yourself ‘I should have bought earlier’ or ‘I sold too soon’? Of course you have. Everyone needs to ultimately make a choice – which style is best for you?
This is why it is absolutely essential to focus on a particular style and stick to it. Deviating from our plan is a recipe for disaster. Focusing on one style necessarily involves sacrificing other investment approaches. Once we clearly define our investment or trading objectives, it becomes much easier to stick with your plan and ultimately achieve success.
Know Thyself
We want to develop a strategy that works for us individually. What may work for you personally may be different than what will work for your neighbor. It all comes down to risk – are you able to stick to your plan during the most volatile times? A sound strategy would be to model the successful strategies of past investors or traders who have a history of outperforming the market. Even with this strategy in hand, realize that it won’t work out in every trade or investment but will work over time.
You may favor buying and holding stocks for several years at a time, placing your investment capital into ETFs or mutual funds and simply ride it out during the good times and bad. In this case you would be considered a long-term investor. Even most professional money managers have trouble beating the S&P 500 (SPY - Free Report) index each year, so for most people this is the best way to go.
If you prefer to commit your investment capital for shorter periods of time, you’re likely to be considered a trader. Intermediate-term traders typically commit capital to trades for a period of a few months up to one year. Intermediate traders seek to benefit from favorable market periods and get out of the market during the unfavorable periods. Shorter-term traders are involved in trades that are usually less than two months; swing traders typically fall under this category, as well as day-traders which are an extreme example and move quickly in out and out of the market in a matter of minutes.
Setting Goals with Zacks
Fortunately for both investors and traders, we here at Zacks provide you with a host of varying longer-term investing as well as shorter-term trading services designed to fit your personal goals. You can view a complete list of our services here.
Most people prefer to ‘set it and forget it’ when it comes to investing. They follow a detailed investment plan set forth by a financial professional in an attempt to achieve their financial goals. They have so many other things going on in their personal lives and don’t have time to pay attention to the daily market fluctuations or perform the daily research it takes to be a successful trader.
Some readers may opt to have long-term investments that they don’t have to devote too much time to, but also have some spare time to devote to shorter-term opportunities. These people may have the capacity to blend investing and trading styles. If you find yourself falling under this category, our Zacks Ultimate service may be your new best friend.
Regardless of which approach you prefer, it is vital that you stick to the plan.