Friday, 13 November 2015

Travestor: The New Category of Stock Investor

Time and again I have come under criticism from the people around me for selling stocks “too soon” in order to make profits. A few have said that I am a “trader” and not an “investor.” In the world of investing, the term “trader” has got a negative connotation. It stands for a person who does all kinds of somersaults and jugglery to produce minuscule profits. The intensity with which the investment fraternity balks at the idea of trading makes it look like some ultra antihuman activity.

Well, to dispel all doubts, I am not a trader in its classical sense. And I am not necessarily a long-term investor. The time for which I hold a stock is immaterial to me. What matters to me is the selling price. Stock Market Investing for Employees introduced the EPS approach, which lets you calculate the selling price for a stock. It’s the selling price that dictates how long I hold onto a stock. If the selling price is far away and takes a long time to come (during which the stock keeps fulfilling the investment criteria), I become a long-term investor. If the selling price comes the next month, I am out of the stock and you may call me a trader. Those who have a difficult time categorizing this approach may call it “travesting”—a combination of trading and investing.
Every day the market throws a price at you for your stock holdings. The successful investor knows when to accept the price. Since most don’t know when to, they take shelter in the idea of long-term investing, which only absolves them from taking responsibility of their stock investments. Long-term investing is not mandatory; it makes sense only when the stock you own will take a long time to fully realize its potential. For example, if the selling price is away by 500 percent, you may have to hold the stock for the long term. But if the same stock goes up 500 percent in less than a year (it does happen, don’t be surprised), you are expected to sell out.

Travestors also realize that they are in the market for making money, not to live up to some traditional, sacrosanct theory like long-term investing. They care not about trading or investing but about their profits.

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