Please tell me what the difference is between the both of you.
Glad to.
The most important difference is that traders are not, as a rule, concerned with the long-term prospects of a company (even if they plan to trade in a stock over the long term); their only concern is the movement of the company's stock over the short term. As an investor, I am not as concerned by a bad earnings report as are traders, who run around like the sky is falling on a $.02 earnings miss because their outlook is one day or a week or a couple months.
Your points are valid: Yes, traders help move the market. Yes, we're all in this to make money.
But,
I am involved in Lucent because it is a strong company with outstanding prospects for future growth. I know that buying Lucent's stock now will give me a very, very nice return five or 10 years down the road (hell, probably even five days down the road!). And I never invest any money in the market that I wouldn't just as soon set fire to; you have to be willing to let it go.
Traders are involved with Lucent because it's volatile right now. It's relatively recently spun off AT&T, has had a great run since, and just split. Traders are gathering around like sharks at a feeding frenzy. When Lucent's growth stabilizes and becomes less prone to these meteoric jumps, the traders will thin out and go elsewhere for their fun.
It's all about your outlook. Traders, by definition, create noise. Investors create stability.
Good luck to you.
Mark |
