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Are You A Trader Or Investor?

The Motley FoolIt’s Christmas, which means that it is also time to put away your spreadsheets and laptops and enjoy a day or two away from managing your portfolios.

But just how easy is it for you to take a break from trading?

Are you, for instance, a compulsive trader but don’t even know it? Do you, for example, find the need to trade in increasingly larger amounts just to get the same “buzz” that smaller deals used to provide?

Do you ever find the need to sneak in a trade during working hours or when you are supposed to be spending quality time with friends and family? Do you have one – or indeed several – of those snazzy apps on your smartphone and tablet that allows you to monitor stock price movements minute-by-minute?

If so, then perhaps I might already be too late. You already are a compulsive trader. But for those of us who don’t want to end up being like that, here are a few warning signs that you might want to look out for during the festive break.

Ticker, ticker everywhere

Do you, for instance, see stock market tickers everywhere you turn? For example, while most of us will look at car number plates and see just that, a compulsive trader might see embedded ticker codes instead. Oh yes they could.

So a number plate STY 92XX could invoke images of Singapore’s largest listed brewer Thai Beverage. Obsessive traders might also refer to businesses by their tickers rather than their proper names. So, SingTel becomes Z74 and StarHub is CC3.

Pet names

Most people, it should be said, like to name their pets after mythological and legendary figures. Hence, Apollo and Zeus can be quite popular names for dogs and Sheba for cats. However, if you have named your pooch or moggy after Fabonacci and Bollinger, then this might be an early symptom of compulsive trading syndrome.

Public Holiday phobia

Do you suffer from a dread of public holidays because opportunities to trade have been cruelly snatched from you? Does the prospect of a long weekend fill you with dread rather than joy? Do you look at your calendar and wonder how on earth you are going to fill your down-time without a chance to fill a trade?

Vacation vacuum

What is the first thing that you do when you reach your holiday destination? Do you hunt around for the nearest Wi-Fi hotspot so you can carry on trading whilst you are on your vacation? Do you throw a tantrum if your hotel room does not carry cable television with access to one of those vital financial news channels?

On a slightly more serious note, it is good to be interested in what is happening in the stock market, especially to those companies that you have a financial interest in. After all, you are a part-owner of the business.

But it is not a good idea to overtrade.

Christmas pudding

It is important to bear in mind that every trade costs money and trading frequently can quickly eat into your overall returns. Warren Buffett once joked that frequent trading is good for your broker but not good for you.

Consequently, it might be better to spend time looking for quality companies that you can buy to hold for the long term. The sign of a quality stock is one that you rarely need to monitor because you should have absolute confidence in its future. And the only time that you might want to look up the share price is when you need to buy more.

Investing, as Warren Buffett once pointed out, is so favourable to the investor that it is a terrible mistake to dance in and out of it based on the turn of a tarot card. But the proof, as they say, is in the (Christmas) pudding.

For example, over the last decade, Keppel Corporation (SGX: BN4) has delivered a total return of over 500%, while SIA Engineering (SGX: S59) has rewarded shareholders with a return including dividends of around 380%. With those kinds of returns why would anyone want to dance in and out of the stock?

This article first appeared in Take Stock Singapore.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.