But do you want to invest or do you want to trade? If what you want is to invest your objective should be to get the average of the market as cheaply as possible not beat it. Here are two articles to help you with that:
> But do you want to invest or do you want to trade?
This is a false dichotomy.
First, just semantically speaking: investors "invest" in hedge funds that engage in speculation via trading strategies across a continuum of risk profiles. Hedge funds take their capital from "investors"; they typically have "Chief Investment Officers", and their traders execute trades in order to fulfill investment goals for clients according to fund-specific "investment mandates."
Second, by actual meaning: investing does not refer only to "value investing", which is substantially what you're referring to. Investors are, in the abstract, people who seek a positive return on their capital relative to another benchmark, where that benchmark is typically parameterized by risk, percentage return and liquidity. Trading is an activity in the service of investing, and a trading strategy is the execution of an investment thesis. The principles that allow for positive returns in value-based investing and index investing broadly generalize to other areas of investing, and essentially map to the concepts of arbitrage and (mis)priced assets in the abstract. Just as you can get invest your capital in real estate or young startups, you can invest your capital in trading strategies.
Whether or not it's wise to pursue a self-managed trading strategy (or seek others to manage one for you) is a completely separate topic; my point here is to emphasize that we're doing a conceptual disservice in education (and an abuse of well-accepted terminology) if we act as though trading and investing are different concepts. A much better way to frame your point here is to use terminology such as "passive investing" versus "active investing."
>investors "invest" in hedge funds that engage in speculation via trading strategies across a continuum of risk profiles
This is precisely the opposite of what I'm suggesting. Instead of implementing these trading strategies just buy the average of the market at low fees and don't trade anything.
>investing does not refer only to "value investing", which is substantially what you're referring to. Investors are, in the abstract, people who seek a positive return on their capital relative to another benchmark
Again a misrepresentation. I'm definitely not arguing you should be value investing or trying to get alpha by beating any benchmark. Quite the opposite. I'm arguing you should just hold the market average which requires no trading besides the initial purchases.
>if we act as though trading and investing are different concepts. A much better way to frame your point here is to use terminology such as "passive investing" versus "active investing."
I'm definitely arguing for passive investing but also in strategies that quite actively do not trade. Ultimately this is just splitting hairs on terminology but you'll be hard pressed to find the term "trading" in actual use for someone that just passively invests in the total market. I doubt you'll find anyone on bogleheads.org that will identify with the term. Trading is a term usually reserved for people who will actively trade in and out of various securities on a regular basis.
For part of your portfolio yes but once you have a decent amount (when say your normal size of order is £2k) you want to start diversifying and playing on special sits and corporate actions.
An example from the UK electra private equity ELTA was on a massive discount activist investors came in and I made over twice my initial investment in two month - I would have busted my yearly allowance for dividend income just on that stock alone.
You can't diversify more than just holding the total market. And since market returns are zero sum for you to make that great profit someone else had to lose. I'll just take the market average at very low fees and not worry about it. That's what the first link explains.
You can diversify across markets (different countries) and sectors and also to lay off risk, but I have been investing starting slowly with index funds 20 years ago so I think I have more experience.
I brought a commercial property fund when office prices crashed it tripled in less than 10 years.
>You can diversify across markets (different countries) and sectors and also to lay off risk
And you should. The ultimate goal is to own a cap weighted proportion of all the assets in the world. If you do anything other than that you're taking an active bet that some assets will do well and some poorly and someone else is taking the other side of that bet. The sharpe article is quite revealing.
This is a false dichotomy.
First, just semantically speaking: investors "invest" in hedge funds that engage in speculation via trading strategies across a continuum of risk profiles. Hedge funds take their capital from "investors"; they typically have "Chief Investment Officers", and their traders execute trades in order to fulfill investment goals for clients according to fund-specific "investment mandates."
Second, by actual meaning: investing does not refer only to "value investing", which is substantially what you're referring to. Investors are, in the abstract, people who seek a positive return on their capital relative to another benchmark, where that benchmark is typically parameterized by risk, percentage return and liquidity. Trading is an activity in the service of investing, and a trading strategy is the execution of an investment thesis. The principles that allow for positive returns in value-based investing and index investing broadly generalize to other areas of investing, and essentially map to the concepts of arbitrage and (mis)priced assets in the abstract. Just as you can get invest your capital in real estate or young startups, you can invest your capital in trading strategies.
Whether or not it's wise to pursue a self-managed trading strategy (or seek others to manage one for you) is a completely separate topic; my point here is to emphasize that we're doing a conceptual disservice in education (and an abuse of well-accepted terminology) if we act as though trading and investing are different concepts. A much better way to frame your point here is to use terminology such as "passive investing" versus "active investing."