Trading is less risky than investing. Argue with me here.

I am a stock trader and I will never invest. I’ve seen too many “quality” companies have their share prices reduced to pennies. Those poor people who bought into dot-coms at or near their highs will likely never see their beloved investments return to the prices that they were purchased at. Investors don’t make money in bear markets. Traders (good traders) can make money in any market. Anyone care to weigh in with their opinion?

The people buying the dot coms were speculators, not investors. Everyone knew they were overvalued and were due for a crash, but still people continued to push the prices up. It was tulipmania all over again (and that sort of mania reoccurs every few years – people never learn).

Investors make money in any market, too. Oh, sure, there will be downturns, but if you stick to fundamentally sound stocks, you’ll do fine.

Traders are much more likely to make their brokers rich than themselves. There’s an axiom among stock professionals: It’s time, not timing, that makes the difference.

My observation from litigating and picking up the pieces is that traders can and do lose money in any market, including a rising one. Does that mean all will? No, but sound trading is not a substitute for sound investing.

In hindsight you can say that everyone knew that the dot coms were going to crash. Hindsight is always 20/20. The truth is that many investors believed that their stocks were going to keep going up. The final stage of a bull market is usually a fast move higher that leaves investors amazed and has them saying to thinking that they’d better jump on the boat before it leaves them behind. Once everyone was on board, there was no one left to buy and no direction for the market to go other than down. When bullish sentiment is too high, it usually means that a downturn is imminent.

After this bear market, I wouldn’t trust any stock that is “fundamentally sound”. The nasdaq lists many of these fundamentally sound companies (or so people thought) that may never return to their highs. JDS Uniphase, the supposed leader in fiber optic technologies, is over 90% below its all-time high. This is one of those tech companies that everyone loved. Now many investors will have to wait a very long time to recover just their original investment. Possibly 10 years or more. In my eyes this is 10 years of wasted time. The stock will have to rise over 1300% to get back to its all time high - a daunting task, especially for a stock like this which has loads of resistance ahead of it.

OK look, if you’re going to invest and not trade, at least CUT YOUR LOSSES! That is the best investment advice anyone could ever give.

I think I have highlighted the relevant phrase. It is not easy to be a good trader. It is terribly time-intensive. And, unfortunately, the only way to learn if you (or your representative) are a good trader is to put your money at risk.

For me, money is important, but getting every possible dime isn’t. I invest enough money to keep me flush in my dotage and I spend the rest of my time having fun. I don’t have enough timr or desire to be a dedicated trader and I don’t trust anybody else enough to do it for me.