Investing vs Trading

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When we turn on the TV, we’re expecting to be entertained on some level. It doesn’t matter if it’s HBO or CNBC. Now, we may not think about it that way, but producers focused on attracting eyeballs. I always remind myself that there is an entertainment element to the Financial ‘news’.  It isn’t meant for investors, but for traders, people who believe speed is paramount.

As financial advisors, we understand there’s a big difference between trading and investing:
One is about value; one is about price.
One is about the long term; one is about the short term.

Even though the words are used interchangeably, they don’t mean the same thing. Speed doesn’t apply if you’re an investor. If you have a plan, if you have goals, you’re an investor. Months matter. Years matter even more. In other words, you don’t need to make decisions on Tuesday based on what the markets did Monday.

For traders, though, speed has become central to everything they do. The latest information matters. Making something happen in milliseconds matters. But none of that applies to our clients.

I understand how hard it can be to see and understand this distinction. After all, the people on TV are so persuasive, so certain that everyone should be doing something right now. The urgency to act can influence almost anyone if the message hits at the right moment.

But in our role as a trusted advisor, we help clients understand that a difference does exist and respecting that difference matters if you want to reach your goals.

Special thanks to Carl Richards for his thought on trading vs investing. Carl is the author of the weekly “Sketch Guy” column at The New York Times. You can learn more about him and his work at BehaviorGap.com.

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About the Author:

Paul is the co-founder of Concentus Wealth Advisors and currently serves as the Chief Operating officer of the firm. After graduating with his Finance degree from Georgetown in 1997, Paul spent three years working for Credit Suisse First Boston in New York on their institutional sales desk and then as Director of Global Equities Information Technology. Paul continues to use his technology expertise to bring cutting edge resources to the Firm and their clients. He currently resides in Berwyn, PA with his wife and four children.

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