Why Investing is better than Trading

Updated: December 18, 2020

by Roy Philipose

What could have been...

I want to share my investing history with you. I want to show you why "investing" is better than "trading." I see so many young investors trading today. I know because I was one 20 years ago. 

I have been investing since 1997 when I bought my first shares of Cisco stock. I remember that day - I bought 100 shares of Cisco at $54; then the next day, sold at it $56 for a 2 point profit. (Cisco reported better than expected earnings.) I thought this was cool.

I kept doing this for a long time, over many years - buying/selling shares and eventually, trading options. I thought I was an investor, but in reality, I was simply a trader. My gross trading profits were ~ $300K over a total 23 year period.

I remember all of the significant companies I held. These were the shares that I was supposed to HOLD, and not trade. Eventually, my years of on and off trading resulted in me being wiped out twice. 

Sometimes, we have to repeat the mistake before we actually learn from it.

To be honest, I don't have financial stability; and I have traded to generate that, which doesn't come through consistently. I have also sold for short-term profit... to say barely provide for myself.

Also, I have found trading to be stressful and requires a lot of effort; whereas, investing is less stressful and requires less effort. 

By early 2020, I had sold most of my new Tesla stock at a profit to buy domain names to flip. (It was supposed to be a temporary stock sell and buyback.) Selling the stock was a mistake because Tesla got repriced much higher. Tesla stock was flat for a long time and all of a sudden it popped. I remember Peter Lynch saying something like "Stocks can jump on you at anytime," and Robert Kiyosaki saying that "Assets can increase exponentially and Income can increase incrementally." 

But we try to learn from our mistakes and move on. 

By August 2020, I had finally "cracked the code" on stocks and fully understood how someone like Warren Buffet invests and how easily he makes his money, and I intend to do the same. 

The chart below shows the actual shares that were held on a cash basis. I would have done well by taking $82K and turning it into $5.2M - just by holding the dam shares. Simply holding the shares would have generated a 63 fold return (6241%). I have since learned my lesson.

YearStocksSharesCost PriceCurrent PriceTotal CostCurrent Value
* $5K Min. Estimate
© Roy Philipose 2020

I am a terrible trader; but I think I can become an awesome investor, and I am going for awesome. 

In the late 90s, I did not know what I was doing, and eventually, I got wiped out. 
In the 2010s, I had an idea of what I was doing, but eventually, I got wiped out again.
Now, in late 2020, I have an exact idea of what I am doing, and it's all good.

Overall, my biggest mistakes:
1) Selling too early
2) Selling when prices dropped
3) Trading stocks/options

I don't sell early anymore or when prices drop, and my trading is finished. 

I don't trade anymore. 
Why? Because investing is better than trading

It is impossible to predict short-term prices on a consistent basis; however, it is possible to predict long-term prices. 

Going forward, my investment strategy:
Buy shares
Hold shares
Add shares

Success = CMP > ACP
Success is when the current market price is greater than your average cost price.

Become an investor, not a trader.

Investing creates value. 
Trading does not.

I am going back to being a full-time investor. Being a part-time, on and off investor has not worked out well for me.

I hope you learn something.
If you are serious about stocks, find a mentor.
I did not. 

By the way, if you get rich, be and stay humble.
To be honest, if I had this stock portfolio today, I would be a different person and less caring.
I guess, things happen for a reason. 

I am currently rebuilding my stock portfolio and working on A/X Growth.

- Roy Philipose, Investor

Copyright © Roy Philipose 2020.

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