Investing or Trading?

. August 4, 2011
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What's the difference between investing and trading? The biggest is how often you trade. If you only trade (and pay commissions) once a month, you live almost like an investor does. You can spend most of your time on your calling instead of the markets.

If a strategy trades a maximum of once a month, what I call it depends on the context. It's fair to call it investing if your strategy doesn't take a lot of time to implement. Even some long-term investors will trade once a month in order to rebalance their portfolios.

The reason you would use a once-a-month trading strategy instead of just holding stock is, of course, that you think you can do better than buy-and-hold. There's ample evidence that you can through momentum.

Once a market starts moving, it tends to keep going. That's momentum.

I use several strategies at the same time and trade several times a month. Titling the site Reformed Trader accurately reflects what I do, but it's one of those "don't try this at home" things. You can make healthy food at home without going to medical school, and you can invest your money wisely without being a multi-strategy trader.

True success doesn't have much to do with money, though money can help you if it doesn't become a distraction.