Investors versus traders.

This isn't always a matter of time in the market, but it is a large contributor. There are traders across the world that buy and sell stocks for a matter of minutes! Conversely I know of people who have held their shares of Apple for over 15 years, and never intend to sell them.

This course is designed for both long and short term investing. Because essentially the theory is the same for both. The only reason you would buy a stock in the short term, is because you think at some point, another buyer will be prepared to pay a higher price in the market in the future, than you did today. That buyer may be investing for the long term.

Therefore, your reasons for buying today should be somewhat inline with that of a longer term investor. For the stock to go higher, you need them to come in to the market as a buyer in the next few days. You both agree that todays price seems a "good deal'. Alternatively, you need less people to want to sell the stock in the coming days... alleviating the pressure pushing the stock price lower. (We will go more into the demand versus supply dynamic of markets in a later lesson!).

To put it another way; Short term investing can be driven by predicting that a long term investor will soon start accumulating shares, and drive the price higher. To make that prediction, the short term investor needs an insight into the way a long term investor thinks. Hence why this course is focused on teaching you both aspects of investing and speculation.

Let's pull in a movie quote from Jeremy Irons speech in Margin Call to help put this in context. The movie is about the Lehman Brothers collapse, however CEO of the bank explains how he has risen to become a top trader or investor over his career;

"There are three ways to make a living in this business: be first; be smarter; or cheat. Now, I don't cheat. And although I like to think we have some pretty smart people in this building, it sure is a hell of a lot easier to just be first." (John Tuld, Margin Call)

As a private investor it is hard to be smarter than those who are privy to a lot more information. However if you are focused on an area where you have a good deal of knowledge and experience in, or you have a strong view about how an industry such as electric cars will do in the medium to long term, then you can take a long term view that has just as much chance of bearing fruit as an investment manager.

I'll give you a few examples from my years in trading;

My grandmother had the best early call in Marks & Spencer in 2004. She was really impressed with the new clothing range, and told me all her friends were buying it. A 30 year old male research analyst banker in the City of London has no idea what Scottish grandmothers are buying until he sees it in the numbers 3 months later! By which time the stock has already jumped on strong results. You can have an advantage if you are closer to the target market of a product than investment "experts" can be.

Then there is the opposite story. Any female in their 20's who was a French Connection brand customer at some point would tell you that the fashion of having FCUK written on t-shirts couldn't be a long term viable business. The share price was a painful slow erosion from 500p to 29p over a 5 year period (see the graph below), and continued lower in the next ten years no matter how many times they tried to revive the brand. (A similar story of record shop HMV or video rental Blockbuster.... any millennial child could tell you these shops have no future and share prices headed to be worthless!)

However bankers and investment experts would continually tell you to buy the stock time after time, year after year. Because sometimes these guys are too busy with their heads in spreadsheets to actually take a walk into the store and listen to what their target markets are saying. You can have an edge. You can "be smarter" like Jeremy Irons suggests. But he is right, it's far easier to be first!

Watch the video below for an anlalogy from everyday life: