Thursday, June 11, 2015

Being a Good Trader and a Good Asset Manager

It is very important to understand the difference between trading and asset management.  Trading takes advantage of short-term dislocations and seeks to make relatively quick returns.  Asset management is a balanced approach to investment, in which the investor seeks long term returns from underlying factors that drive the returns across markets.  

Traders are like skilled poker players at the casino, sizing up their hands, sizing up the other players, and making intelligent bets when odds are favorable.

Asset managers are like casino owners who dedicate resources to a variety of games that appeal to different gamblers.

If you live life like a good trader, you will step aside from noise and pounce on life's opportunities as they present themselves.  

If you live life like a good asset manager, you will identify the factors that drive your happiness, fulfillment, and success and pour your resources into those.

It's a theme I don't hear people talking about:  how you manage your money is how you should be managing your life.

Are you living life like a good trader, identifying and pursuing real opportunities, while standing aside amidst noise?

Are you living life like a good asset manager, balancing your life's assets to achieve a continuous stream of favorable returns?

Too many people live like bad traders and bad investors:  they overtrade and fail to invest.  

The ability to pounce on real opportunity here and now combined with the investment across many areas of opportunity--not a bad formula for running one's finances.  Also not a bad formula for leading one's life.

Further Reading:  Rules for Life and Trading