Comments on The Peridot Capitalist: Differentiating Between Trading and Investing

I think I'm late to the party. But, I posted my tw...

2008-03-14T14:29:00.000-04:00

I think I'm late to the party. But, I posted my two-cents (albeit a rather lengthy two cents) on the topic. Trading versus Investing. I think its really interesting to see it from your side as an investor and John's side as a trader. I, myself, am still working on whether or not I fall in one camp or the other.

I'd add that derivative traders as a whole are at ...

2008-03-05T20:03:00.000-05:00

I'd add that derivative traders as a whole are at a statistical disadvantage because the number of longs equals the number of shorts and so therefore the net profit is zero. Take away bid-ask spreads and commissions and they have a net loss. Now some derivative traders are in fact hedgers and aren't trying to make money but instead mitigate loss - buy insurance. Of the remaining speculators some lack skill and are like roulette gamblers and others have skill and are more like the casino or professional card player.

In asset trading where there are fewer shorts than longs and positive expected return, there is no reason why the total return couldn't be split between traders and long-term investors (and firms that issue stock and bonds) in any particular way as almost all investors do in fact trade if only to invest new income in the financial markets.

So some players in the markets are like gamblers and others like casinos but it doesn't necessarily break down neatly between traders and investors.

Just posted my thoughts on your thoughts: The Diff...

2008-03-05T11:28:00.000-05:00

Just posted my thoughts on your thoughts: The Difference Between Trading and Investing. Shall we start a running cross-blog conversation on the subject? :-)