Thread by @Am_Shai

It's the weekend and time for a thread.

I would like to share my views on #Trading and #Investing.

I see a synergy in the 2, fully aware that there are radical and often polar opposite views for both trading and investing.

Most traders diss investors and most investors do not think kindly of traders.

Investors talk in terms of wealth creating and urge you to invest savings etc in investing. Those who do so end up with the "good life" at 65-70 with no friends to share the riches with.

Traders on the other hand are constantly working for that extra few percent every month.

You cannot be wealthy, till you can make money whilst you are sleeping also.

Leveraging creates wealth.

Most good traders have abundant cash at the end of the week or month. Most investors starting off are short of cash.

Investing is not a one time cash-in process. Best results are to those who can steadily deploy capital over a period of time.

I am a trader and consider myself a decent one.

I'm also an investor and not a good one yet as the journey and goals ahead are not yet scaled.

I'm into trading to make money for investing. Allow me to explain..

Trading is also called speculation and is short term in nature. I consider trading to be exploitation of a short term opportunity in the market. This opportunity is limited and allows only an "early majority" or an "early adopter" to make money.

In the above image, in trading, when the opportunity presents itself & you are not positioned on the left side of the gaussian curve you can lose money quickly as the window of opportunity is small

Trading punishes people who are laggards and in the late majority.

Fact check- 70% of traders fail to become profitable in a year and 95% stop trading after 3 years.

This same chart works equally as an investor also, except that the opportunity does not die if you can stay in the game.

So even if you are in the late majority , you can still make money if you stay invested because of the power of compounding and the fact that TIME> MONEY

This is also the single biggest reason why investors and those with a longer time invested in the markets make money.

The markets reward handsomely those who allow capital to compound with the blessings of time.

Do you know of anyone who has been consecutively bearish for the past 10,20 years and still around?

And how many around who have been bullish for the past 10 and 20 years?

Over the long term the markets are bound to rise as liquidity keeps driving them up further.

And if there is a serious issue such as the one we had with COVID around March 20 or Lehman in 2008, then the Cavalry will come to get you out.

Read that as Central banks+ Governments.

To be good at investing, you have to generate a steady cash flow which you can deploy into the markets whenever the markets are presenting an opportunity.

Translation - during deep corrections.

Big question- Where do you generate the cash flow?

Answer - From the markets through trading

Generate from the market
Keep some - deploy the rest back
#stressfree life

Most investors during corrections are busy watching NETFLIX etc as they while away their time.

A knowledgeable investor and one who has a steady cash flow will be using the time to scout for investing opportunities in the businesses he likes

Pro-tip- Investing is done in businesses you like and which you feel can generate outsized returns over next 5 to 15 years. Every quarter is a day in the markets and investors live from one earning cycle to the next and in conference calls/ interviews of managements

If you are not doing the above and are constantly worried about where your stock will open next day you are trading .

It's far easier to trade indices than stocks

Most people make big money trading indices over stocks.

To trade indices you need to learn a process and be very good at it.

Business which are good can generate cash flow. This is the truth of the marketplace.

How do you become good in the #process?
Ans- By having an edge

The markets are not a democracy where the majority opinion wins.

To win in the markets , you need to have systems and processes which are not used by everyone ( aka the majority)

I realised that when I started off and went to work on some processes which were not common place. I made a good decision.

I'll leave you to make the right decision for your self
Have a good weekend.