Invest right for your trade type - Part II Short term investor


The situation

In most of my classes, I will share on the topic of investment strategies. Usually before I start the class, I would survey my class, about who they think they are or they are more geared towards any of the above 4 types, choose one? Most will assume themselves as a "Long term investor" or value investor. Then, I let them attempt a short quiz and the revealing answer is that most of them fall under "Short term investor" and "Short term trader" type and in fact almost none fall under "Long term investor".

I explained to them, most perceived or maybe branded themselves as "Long term investor" or "Value investor" as being stable. However, through the quiz, it revealed their inner man with the motivation of "I would prefer to accelerate in how much I can make". There is nothing wrong to think this way, as we are all human.

Mismatch

At this point, we have to recognised there is a mismatch in who we think we are and who we actually are. The good news with this exercise, we were able to identify ourselves as a "Short term investor" instead of "Long term investor", therefore it is the mindfulness of how we can make our investment plan that matters.

If you are a "short term investor" type, how should you plan your investment?

Whenever you have identified an investment opportunity, try to classified it, it's holding period, how long it is going to take to see some assurance you have made the right investment choice. If the wait is going to be at least 3 years and more for example like investing in a start-up, knowing that you belong to "Short term investor" type, you could either give this investing opportunity a miss or be discipline enough to wait through for at least 3 years to make another round of assessment much later; if you would like to invest in a second tranche. Means with a clear identity knowing we are investing into something that we are not, the right type, we should not be waver by any short term volatility.

However, if you have identified another investment opportunity. Again, try to classified it, it's holding period, how long it will take? Or your expectation that this investment to appreciation, within the next 3 years? If this is the case, there is a match on this investment opportunity to your "Type".

Investment tools for "Short term investor"

I will recommend stocks and especially Singapore stocks. Refer to the following blog which I have published last year in April, we had discussed Singapore stocks are trapped in this 1,000 point range since 2011, and today this range, it is still intact. Look closer on each of it's cycle, it is about 3 years! If you belong to "Short term investor" type, you are considered blessed to have this equity market that is here.

The strategy will be, invest around the cycle low and be determined to take partial or all profits when it's reaches it range high as you are not in the business in "Long term investing".

Also in selecting the instrument type, my first priority will stocks and can consider derivatives as an hedging instrument.

https://www.weipedia.com/single-post/2018/04/08/STI-1000-point-range

Invest right for your trade type series

Stay tune for the next part of this 4 part series, I will discuss about "Short term trader type".

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https://www.weipedia.com/investment-strategies

https://www.weipedia.com/short-term-trading-strategies

Notice the instrument type as "Stocks and can consider derivatives". Means the priority is in stocks and can consider derivatives as a hedging instrument instead when needed.

#longterminvestor #Property #Bonds #Unittrust #ChinaETF #Assetclass #Stocks #Passiveinvestor

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