Trader or not trader?

There has been a bit of discussion about whether I am a shot term trader or not. Here are my thoughts about it:

Okay, I think of a day-trader as someone who closes his positions at the end of each day. I think of a short-term trader as someone who buys a stock at $40 with the hope of selling it at $43 and making $3 in the next few days.

When I buy a stock I never even THINK of a selling price. It honestly doesn’t even cross my mind. I like the company and I’m buying it to hold it.

It’s true that I may make changes in the allocations of two stocks in my portfolio, trimming one slightly because it’s gotten too big, or because the other seems like a better prospect at present, or even because I’d like to take a try-out position in something new. To me that has nothing to do with trading. It’s changes in allocations within the portfolio, and is usually just trimming around the edges. For instance my top two positions, SWKS and SKX were both in my top three seven months ago, with approximately the same percentages of the portfolio as now (that’s the end of June, which is as far back as that information panel on the right side of the page goes. The third of my top three was BOFI, and it would probably still be in the top three as well if circumstances didn’t change my perception of it). Short term traders don’t hold positions for two weeks, much less seven months. But that’s just my way of thinking about it.

On the other hand, I had a small position on CYBR and it had a buy-out offer and rose 20% in a day, reaching a PE of 60, on a day when other great stocks were crashing to PE’s of 10 to 13. I allocated completely out of CYBR to buy more of other stocks in my portfolio. That has nothing to do with short-term trading. I didn’t buy it with the idea of selling it at a certain price. A lightning bolt hit it! Even the MF, the epitome of buy and hold, has recommended selling a stock that has risen on a buy-out offer. But again, that’s just how I think about it.


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I believe there is another VERY crucial factor to consider in this matter:

Saul is retired from his medical practice. He now must live off his investments. That means pay the mortgage, help your child through college, buy food and clothing, etc. Would that not sharpen your investment acumen enormously if that was your only way to fund the necessities of life? It sure would for me.

If you have a 25-40 year investment horizon with plenty of money coming in from your life work, buying and holding for years at a time may make perfect sense if the story is still good…and perhaps even if the company is losing money like a drunken sailor. WPRT anyone?

However, Saul’s track record is the envy of even seasoned professional investors. I believe some of them are peeking at Saul’s monthly holdings, which anyone can access thru Google. I sure can’t blame them and would probably do the same.

Our little board under Saul’s leadership may be casting a wider net than any of us realize.



The way I interpret your buy/sell activity has nothing to do with “trading” (be it “day” or “short-term” or some other variety). As I see it your market activity can best be explained as asset allocation with the goal of maximizing over all returns.

The time frame is not part of the consideration, so by definition it is not “trading”. Traders are always bound to period of time. You are opportunistic (that word sometimes has negative connotations, I do not use it in a derogatory sense). My view is that you are constantly balancing alternatives. You are neither hair triggered nor hair splitting. By that I mean that your buys and sells are always well considered as opposed to impulsive and considering that investment analysis is rather imperfect, you seek significant alternatives before taking action rather moving in and out of positions based on what appears to be small percentage differences.

Given that you may still buy into a position one day and sell it the next, it is still not a “trade”. It depends on available information rather than elapsed time or stock price gyrations.

Do I have that about right?

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Do I have that about right?

You do.

Serious question - Why do people get so riled up about this topic?

Any large institutional fund that focus on long term investments cannot get in and out all at once of a position. Building and adjusting a position over time is just a part of portfolio management.

Lets say I target a 10% allocation of a specific stock for the long term… say SWKS for example.
If prices decline so that it is 8% or less of my portfolio, I may sell other things and buy more SWKS to bring it back to a 10% allocation.
If prices then rise and my new 10% holding grows to 12%, I sell some to be back at my 10% target and reallocate the proceeds elsewhere.

In that example, did I short term trade or did I adhere to my long term plan? I’d say that is sticking to the long term plan, but where is the distinction, and perhaps more importantly who cares about the distinction? I truly don’t understand the contention from some.

I’ve held stocks for over 10 years and I’ve traded various things holding the positions for less than 10 minutes over the years as well. Am I a trader or an investor? And more importantly, does it matter? As long as it fits in the plan, risk is being given appropriate attention, and it follows whatever process works individually for yourself; that is the most important thing.


does it matter?

That is a good question, and another is: is it even possible to be an investor and not a trader? Everyone has their price.

Lets say you’re the sole proprietor of a restaurant where you eked out 100,000/year in profit, and it’s not growing. If someone wants to buy your restaurant for a million dollars you have a decision to make. But if some idiot offers to pay you 50 million dollars for it, you’d be insanely irrational to turn that down.

If I wanted to buy the restaurant and the owner was charging a million, I have a decision to make. If the chump wants to sell it to me for 50,000, I’d be a bit silly to wait. That doesn’t necessarily mean after you buy it for 50,000, you turn around and try to sell it for a million. But of course you would for 50 million.

To a much lesser extent (duh), the market gives us these kind of choices all the time.