Apakhabar,
We might think about what constitutes an "investor." To the purist, investors are venture capitalists, people who lend money to small businesses to get them started, and the like. These types of investments directly create jobs and services. I understand that somebody who buys shares of GE or IBM intending to hold them for the "long-term" is called an investor, but to me, this somebody is not looking to create anything, let's be serious. This "investor" just wants to park his money in paper that will presumably, over time, give him a higher return than a bond. This investor is no more, no less, important to the economy than the trader, who also puts his money in the same places, just for radically shorter periods of time. To me, they both are traders.
Terribly narrow point of view, IMHO. By your definition all investors are the people who put up the money to start a business. I'll assume for the sake of discussion you might allow you definition to include those who put up money to provide capital for a small company to expand. Does that make all the IPO buyers investors? (I mean the real IPO buyers; not the scalpers who buy and sell in the open market after the stock goes public.) I don't think so. Those folks have been some of the biggest speculators around.
You, and a few others who have posted on this topic seem to hold a point of view that anyone with a profit motive is a trader. I think that is nonsense. Why shouldn't an investor want to realize a profit as a reward for the risk taken to support the growth of a company? There are many legitimate reasons for investors to take their money off the table. Some people have the good fortune to have invested in companies that started long ago and are now enjoying their retirement years. Do you really think they were never investors because they now choose to move that money out of an environment that has become increasingly risky into something that will afford them a safer return? And what about people who just happened not to have an opportunity to get in on the ground floor, but are willing to take the place of former investors by purchasing the stock they want to sell because they see continued growth potential? Are they supposed to just do that out of the goodness of their hearts?. If they are doing it with the expectation of turning a profit, they are now disqualified as investors I guess.
Perhaps this is news to some, but the reason people INVEST is to MAKE A PROFIT. There are many worthwhile causes that would be happy to take their money and put it to good use if they have no expectation of a return. Investments are NOT charity. If you don't believe that, ask the friendly IRS.
What is so hostile about volatility anyway? Somebody in for the long-term, truly trying to "invest", shouldn't pay any attention to the price swings, unless he is on margin, which would suggest a desire to "get rich" by leveraging, rather than investing.
What is so hostile to investors about excessive volatility is that it has become impossible to distinguish between price fluctuations that are driven merely by trading activity, and those that are driven by news that the investor has had no opportunity to assess. To suggest that an investor has no right to react to those fluctuations is to suggest they have to stay invested no matter what happens. Some of them have, and most people around here think they are pretty stupid for doing so. I don't know where it is written that an investment is an all or nothing deal, or that investors have to desist from protecting themselves against catastrophic losses.
Dan |
