Short Term Trading vs Investing, What's the Difference?

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candy_chia
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Re: Short Term Trading vs Investing, What's the Difference?

Post by candy_chia »

Hi Ray,

Thank you for the highlighting the need to be prudent. :D
ngtfook wrote:There is time for everything...

When the interest rate is equal /higher than the market return, people prefer to save the money into bank and earn interest while mitigate the risk. (see chart below. source: MAS)

Likewise for investing into bond. Why Bill Gross of Pimco buy bond? Why HNW people buys bond?

Rich people borrow money to get richer - true.

The creditor (banks) will be happy to lend money to you if you are having consistent cash inflow (employement, etc) or have asset as an collateral.

If you don't have both, how?

By experiencing the hardship of downgrading of the family standard of living (luckily, 7 of us still can afford to squeeze into a 3-room flat) while still studying, I concur the valid points raised by you.

Majority of the investors didn't think they will Lose in the ruthless stock investing game, like my dad who "invested" in shares (though he insisted that it was just plain bad luck till today) cannot recoup this capital, when he faced business failure concurrently. :(

"如果你一开始投资就很顺利,无往不利,你过度的自信心会使你投入的资金越来越多,结果,在临退休,最后的一个周期翻了船, 你可没有本钱东山再起了。” - Dr YC Chan

http://www.masteryourfinance.com/forum/ ... 7&start=30

Image

Inspiring quote by our sifu, Dennis, "What if I'm WRONG, Will I be financially OK?" contains wisdom to be considered before undertaking any "action".
ngtfook wrote: OPM (other people money) is double edges sword.

One can invest to stocks using leverage. If you win, your return will multiply; when you LOSE you may live in distress, bankrupt or even lose your life (Asean Financial Crisis - people commit suicide).
candy_chia
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Re: Short Term Trading vs Investing, What's the Difference?

Post by candy_chia »

Billionaires Dumping Stocks, Economist Knows Why
Monday, 13 May 2013 07:44 AM
By Newsmax Wires

Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and FAST.


(1) Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.

In the latest filing for Buffett’s holding company Berkshire Hathaway, ]Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also Sold its Entire stake in California-based computer parts supplier Intel.

With 70% of the U.S. economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome.

Unfortunately Buffett isn’t alone.

(2) Fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too.

During the second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase. The fund also dumped its Entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee.


(3) Finally, billionaire George Soros recently sold nearly ALL of his Bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares.

Image

So why are these billionaires dumping their shares of U.S. companies?

After all, the stock market is still in the midst of its historic rally. Real estate prices have finally leveled off, and for the first time in five years are actually rising in many locations. And the unemployment rate seems to have stabilized.

===> It’s very likely that these professional investors are aware of specific Research that points toward a Massive Market Correction, as much as 90%.


One such person publishing this research is Robert Wiedemer, an esteemed economist and author of the New York Times best-selling book Aftershock.

Editor’s Note: Wiedemer Gives Proof for His Dire Predictions in This Shocking Interview.

Before you dismiss the possibility of a 90% drop in the stock market as unrealistic, consider Wiedemer’s credentials.

In 2006, Wiedemer and a team of economists accurately predicted the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States. They published their research in the book America’s Bubble Economy.

The book quickly grabbed headlines for its accuracy in predicting what many thought would never happen, and quickly established Wiedemer as a trusted voice.

A columnist at Dow Jones said the book was “one of those rare finds that not only predicted the subprime credit meltdown well in advance, it offered Main Street investors a winning strategy that helped avoid the forty percent losses that followed . . .”

The chief investment strategist at Standard & Poor’s said that Wiedemer’s track record “demands our attention.”

And finally, the former CFO of Goldman Sachs said Wiedemer’s “prescience in (his) first book lends credence to the new warnings. This book deserves our attention.”

In the interview for his latest blockbuster Aftershock, Wiedemer says the 90% drop in the stock market is “a worst-case scenario,” and the host quickly challenged this claim.

Wiedemer calmly laid out a clear explanation of why a large drop of some sort is a virtual certainty.

It starts with the reckless strategy of the Federal Reserve to print a massive amount of money out of thin air in an attempt to stimulate the economy.

“These funds haven’t made it into the markets and the economy yet. But it is a mathematical certainty that once the dam breaks, and this money passes through the reserves and hits the markets, inflation will surge,” said Wiedemer.

“Once you hit 10% inflation, 10-year Treasury bonds lose about half their value. And by 20%, any value is all but gone. Interest rates will increase dramatically at this point, and that will cause real estate values to collapse. And the stock market will collapse as a consequence of these other problems.”

And this is where Wiedemer explains why Buffett, Paulson, and Soros could be dumping U.S. stocks:

Companies will be spending more money on borrowing costs than business expansion costs. That means lower profit margins, lower dividends, and less hiring. Plus, more layoffs.”

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No investors, let alone billionaires, will want to own stocks with Falling Profit Margins and Shrinking Dividends.

So if that’s why Buffett, Paulson, and Soros are dumping stocks, they have decided to cash out early and leave Main Street investors holding the bag.


But Main Street investors don’t have to see their investment and retirement accounts decimated for the second time in five years.

Wiedemer’s video interview also contains a comprehensive blueprint for economic survival that’s really commanding global attention.

Now viewed over 40 million times, it was initially screened for a relatively small, private audience. But the overwhelming amount of feedback from viewers who felt the interview should be widely publicized came with consequences, as various online networks repeatedly shut it down and affiliates refused to house the content.

“People were sitting up and taking notice, and they begged us to make the interview public so they could easily share it,” said Newsmax Financial Publisher Aaron DeHoog.

“Our real concern,” DeHoog added, “is the effect even if only half of Wiedemer’s predictions come true.

“That’s a scary thought for sure. But we want the average American to be prepared, and that is why we will continue to push this video to as many outlets as we can. We want the word to spread.”

http://www.moneynews.com/Outbrain/billi ... /id/450265
walkinepark
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Re: Short Term Trading vs Investing, What's the Difference?

Post by walkinepark »

Just Google "billionaires dumping stocks" and you will find this news appearing as early as January.
walkinepark
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Re: Short Term Trading vs Investing, What's the Difference?

Post by walkinepark »

I mean it's probably a hoax. but of course, stocks has been climbing for 6 months so the risk is higher now for a correction.
walkinepark wrote:Just Google "billionaires dumping stocks" and you will find this news appearing as early as January.
ngtfook
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Re: Short Term Trading vs Investing, What's the Difference?

Post by ngtfook »

IMO, the overall market is not at euphoria stage as the index PER is still at moderate level.
Hence, I think it is unlikely to have a deep correction of 90%. May be 10-20% along the way up.



NO INDEX PER
1 DOW 14.66
2 S&P500 16.12
3 NASDAQ 25.54
4 FTSE100 17.11
5 DAX 15.65
6 HANG SENG 10.43
7 CSI 12.36
8 STI 14.03




walkinepark wrote:I mean it's probably a hoax. but of course, stocks has been climbing for 6 months so the risk is higher now for a correction.
walkinepark wrote:Just Google "billionaires dumping stocks" and you will find this news appearing as early as January.
Price is what you pay; Value is what you get
RayNg
ngtfook
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Re: Short Term Trading vs Investing, What's the Difference?

Post by ngtfook »

S&P and STI Index and PE Trend (monthly).


Image

Image
ngtfook wrote:IMO, the overall market is not at euphoria stage as the index PER is still at moderate level.
Hence, I think it is unlikely to have a deep correction of 90%. May be 10-20% along the way up.



NO INDEX PER
1 DOW 14.66
2 S&P500 16.12
3 NASDAQ 25.54
4 FTSE100 17.11
5 DAX 15.65
6 HANG SENG 10.43
7 CSI 12.36
8 STI 14.03




walkinepark wrote:I mean it's probably a hoax. but of course, stocks has been climbing for 6 months so the risk is higher now for a correction.
walkinepark wrote:Just Google "billionaires dumping stocks" and you will find this news appearing as early as January.
Price is what you pay; Value is what you get
RayNg
chuajinyi
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Re: Short Term Trading vs Investing, What's the Difference?

Post by chuajinyi »

Hi Ray

Where can we get the charts?
Available online?

Thank you
Best Regards
JY
ngtfook
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Re: Short Term Trading vs Investing, What's the Difference?

Post by ngtfook »

http://www.fundsupermart.com/main/artic ... ummary.pdf

chuajinyi wrote:Hi Ray

Where can we get the charts?
Available online?

Thank you
Best Regards
JY
Price is what you pay; Value is what you get
RayNg
ngtfook
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Re: Short Term Trading vs Investing, What's the Difference?

Post by ngtfook »

In addition.... my favorite : LimBoonSay DBS Chief Investment Officer. He is good in major economy outlook.


http://www.youtube.com/watch?v=sYycas4HAKk
ngtfook wrote:http://www.fundsupermart.com/main/artic ... ummary.pdf

chuajinyi wrote:Hi Ray

Where can we get the charts?
Available online?

Thank you
Best Regards
JY
Price is what you pay; Value is what you get
RayNg
candy_chia
Investing Mentor
Posts: 1731
Joined: Sun Jul 17, 2011 11:36 am

Re: Short Term Trading vs Investing, What's the Difference?

Post by candy_chia »

Hi Ray,

Thank you for providing valuable information that are useful for assessing the extend of economic growth.
ngtfook wrote:In addition.... my favorite : LimBoonSay DBS Chief Investment Officer. He is good in major economy outlook.


http://www.youtube.com/watch?v=sYycas4HAKk
candy_chia
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Re: Short Term Trading vs Investing, What's the Difference?

Post by candy_chia »

What Is a Stock Market Correction?

Anyone who watches the stock market knows it doesn't move up or down in a straight line.

Some days it's up; other days it's down.

If you look at the bigger picture, however, you'll see that the market moves in trends--that is, it moves predominantly in a single direction over time.

Within that larger trend, there will be periods when the market Moves in the Direction Opposite the prevailing trend. Such moves are called corrections.


1) Functions of Stock Market Corrections
Stock market corrections occur when the investors and speculators driving a trend take profits.

Most traders use comparison of risk and reward to evaluate the viability of any position. As a trend matures, risk begins to outweigh reward.

Thus, a correction helps to Tilt the Balance back toward Reward as prices Return to more Favorable Entry levels.


2) Significance

In most cases, an individual stock or a broader market will use a correction to return to a support or resistance level.

This can be a trailing moving average or a previous price point that served as a top or a bottom within the trend.

In practical terms, ownership of shares changes hands from Short-term investors--who ride a trend--to LONG-term investors who make acquisitions.

This process is called Moving from Weak hands to Strong hands, and tends to quiet volatility.


Because the Stronger hands are Less likely to part with their shares, the correction (if downward) tends to fuel another rally as speculators try to again purchase shares but find themselves having to pay more.

http://www.ehow.com/about_5033569_stock ... ction.html
candy_chia
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Re: Short Term Trading vs Investing, What's the Difference?

Post by candy_chia »

5 Things you should NOT DO during Bear Market

Everybody loves the BULL Market but NOT the Bear Stock Market. During bear market, the stock market will look stale as activities will be much limited.

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There are many common mistakes that investors tend to do during a bear market. So avoid those mistakes if you don’t want to be pawn by the bear:

1. Do not be Greedy
It is hard to make money during bear market. Do not be greedy by hoping for higher returns. Be Contented.

2. Avoid Contra play

Contra play during bear market is very risky.
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Volume is usually Thinner during this downturn. Your stock will have LESS Energy to Rise.

3. Penny stocks don’t touch
Penny stocks are not the main market movers during bear market.

Blue chips tend to move up or down more during bear market. Concentrate on the BLUE CHIPS more.


4. Too emotional

Check your emotions. Do not despair if your stock is moving south.

Stay focus on your long term goals rather then short term gains

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5. Don’t catch FALLING Knife

Many Good stocks will be cheap. They might Fall for Consecutive Days and you Think it’s cheap.

Don’t catch it. Just imagine catching a falling knife, what will happen?

Image

http://www.kampunginvestor.com/2009/03/ ... ar-market/
candy_chia
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Re: Short Term Trading vs Investing, What's the Difference?

Post by candy_chia »

THE BULL MARKET: SHOULD WE BE FEARFUL?
May 12, 2013

This bull market is now in its 50th month without a significant pullback.
Image

~~ That doesn’t mean that this bull rally will or won’t Last Longer,

~~~ but it may be yet another indication that we are CLOSE to the Top.


As we researched (and rejected) dozens of stocks for our portfolios this weekend, we were struck by the preponderance of lousy company fundamentals. This has only really occurred in the last two weeks. It’s certainly not positive for the market when we are unable to find undervalued stocks for our portfolios.

When will this rally end?

Image

Bull markets defy prediction, therefore we won’t try.

But we can say with some confidence that the higher this market goes, the more speculative it becomes.

History tells us that at some point the party is going to be over.

When does that point come? It’s a gamble right now. The higher this market goes, the more speculative it becomes.

Remember the advice of Mr. Buffett, to be “FEARFUL when Others are Greedy.”

Image

http://intelligentvalue.com/blog/2013/0 ... e-fearful/
alvin
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Re: Short Term Trading vs Investing, What's the Difference?

Post by alvin »

I just did a post on bigfatpurse.com which is relevant to helping all of us to frame the purposes of trading and investing.

Rich Dad will advise you to focus on building your cashflow if you want to be rich. When Dennis Ng was still alive, he would say that is not true. He got rich by capital gains. He became a millionaire by investing $250k in stocks. Who is right?

I will say both are right. In fact, you need both to be rich and there are no other ways unless you strike lottery big time. If you and I know that we do not have the destiny to win big from lotteries, we have to work our way through cash flow and capital gains. Let me give you my perspective in this post and I think it will help you frame your thoughts in a useful manner.

Role of Capital Gains

To become rich, you need to have significant capital gains. In order to have large capital gains, you need to have a sizable capital to invest with. Let’s say you invested $100k after the stock market crash in 2008 and you sold your stocks in 2013 and made $100k. Although your percentage gain of 100% is impressive, you are still far away from being a millionaire. How many times will you need to double the money to $1 million? You will need another 2 market crashes which you may only achieve in 10 to 20 years time. But if you have $500k invested in the same period, you would have become a millionaire in 1 market cycle. It is much faster to become rich through capital gains if you know how to invest.

This is the reason why the rich gets richer. They have sizable capital to invest and grow their money much faster than the average joe. Remember, the growth of wealth is non-linear due to compounding effect.

I think this is simple to understand. But the question is, how do you get a sizeable capital? The answer is not capital gains but cashflow.

Role of Cashflow

Although Dennis got rich because of capital gain, he probably down played the role of cashflow in his wealth building process. When he left his bank job, his income dipped for a few years until he setup his mortgage brokerage firm. The company was making money and Dennis had more than enough money for his expenses. The ‘excess’ money would become savings or investment capital. He had money to invest because of positive cashflow.

In other words, you need positive cashflow to build your capital. Your source of cashflow can be your salary. You need to make sure your expenditure is lower than your salary so that you can have ‘excess’ money to form your capital. If you hardly have enough savings, you need to either reduce your expenditure or increase your income. There are no other ways. Do not leverage your capital excessively to invest as you may not have the financial muscle to hold through the periods your investments are doing badly. You are setting yourself up for financial disaster.

Think of cashflow as a process which you need money to meet your daily needs. You cannot afford to wait for your capital gains to realise in 5 years because you cannot go hungry for so long. Although cashflow is vital, you cannot afford to rely on it solely because you will take a long time to become rich, if ever. Hence, investing for capital gains is still necessary.

Trading and Investing

Most people trade and invest without knowing what they want to achieve. Do they want an income or do they want to grow their money? To me, trading is cashflow and investing is capital gains. I know some people invest for dividends or cashflow but I think that is not the best way to grow wealth. When I invest in stocks, I prefer to hold over a few years. I usually buy when no one wants to, and sell when others are interested to buy. Investments, if done in such a slow and steady way, are quite easy to make money. Sometimes, you can make a few times of your capital. In my opinion, this is the best way to grow rich especially if you have sizable capital.

Trading on the other hand, is good for income. Due to the shorter time frame, you can get cashflow frequently. The amount may not be a lot but it can be enough for you to live and have some extra cash for your investment capital. The frequent but small gains are difficult to make you rich. Some people may mistake trading as a way to get rich quick and I hope by now you understand that is not true. If you have a salaried job and you are happy with it, focus on doing a good job and save up part of your salary to invest. You do not need to trade as you already have an income. Focus on investing to grow your wealth instead, you will become richer than trying to trade. This is because trading is hard and you need to spend a lot of time and effort to figure it out. You have many important things to do in life and you do not want to devote unnecessary energy to trading since it is not going to make a big difference to your wealth. Trading should only be pursued by people who want to make a living from the financial markets.

Conclusion

The best way for the average joe to become rich is to invest for capital gains
You need to have sizable investment capital in order to have gains that would make a difference to your net worth
You need to have positive cashflow to grow your capital
A positive cashflow is established when your expenditure is less than your income
To increase the cashflow, you can decrease your expenditure, increase your income, and/or setup more sources of income
Cashflow alone will take a long time for you to become rich. So you still have to invest for capital gains.
Trading is cashflow and investing is for capital gains.
If you have an income, you should invest and not trade.

http://www.bigfatpurse.com/2013/06/how- ... tal-gains/
www.bigfatpurse.com - Living a Life of Abundance
ngtfook
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Re: Short Term Trading vs Investing, What's the Difference?

Post by ngtfook »

打工王帝. There are so many people in earn > $1 millionaire annual just working for big organization.

or earn income > $250K annually. You will be millionaire soon.

So, one sure way is to work for people. Not necessary owning business. No? 8)



Conclusion

The best way for the average joe to become rich is to invest for capital gains
You need to have sizable investment capital in order to have gains that would make a difference to your net worth
You need to have positive cashflow to grow your capital
A positive cashflow is established when your expenditure is less than your income
To increase the cashflow, you can decrease your expenditure, increase your income, and/or setup more sources of income
Cashflow alone will take a long time for you to become rich. So you still have to invest for capital gains.
Trading is cashflow and investing is for capital gains.
If you have an income, you should invest and not trade.
Price is what you pay; Value is what you get
RayNg
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