Are You a Short-Term Trader or a Long-Term Investor?

Think about it for a minute – and be honest with yourself… Are you a short-term trader or a long-term investor?

You might be surprised to hear me say that there’s not a right or a wrong answer to this question. Sure, there are advantages and disadvantages with each approach, but BOTH short-term traders and long-term investors have the potential to make great returns over time.

If you’ve had a discussion with your traditional money manager this month, chances are good that you have sat through the tried and true “in it for the long haul” speech. And for true long-term investors, this is an important concept to keep in mind.

Long-term investors can’t get worried about volatile swings in the market. After all, they’re in it for the long haul. When prices trade lower, it doesn’t matter. They weren’t planning on selling any time soon and in time they expect their positions to rebound.

The luxury of being a long-term investor is that you don’t have to worry about the day-to-day gyrations in the market. You simply have to wait patiently and allow for long-term growth trends to send the value of your investments higher. Of course the downside of being a long-term investor is that you don’t get to take advantage of the “buy-low, sell-high” opportunities in a volatile market.

Short-term traders can either love or hate markets like this. When things are moving rapidly (and in every different direction) there are plenty of chances for short-term traders to make a lot of money. But at the same time there are plenty of opportunities to rack up losses too.

If you’re a short-term trader, you know that the day-to-day action can be a grind. Short-term traders don’t have the luxury of sitting back and patiently watching. But of course a talented trader can make a much higher return buying cheap and selling dear.

The Key is Discipline

As with most business ventures, the key to success (whether investing for the long-term, or actively trading) is developing a disciplined approach. Long-term investors MUST have a rigorous process for identifying strong, valuable investments that they can stick with for years.

Without this detailed analysis, the long-term investor will undoubtedly pick sub-par investments and will ultimately earn a less-than competitive return. But with a rigorous process for identifying quality investments, and the patience to hold on to these investments through the long-term, a disciplined investor can expect to beat the market over time.

Discipline is just as important for short-term traders. Using risk management techniques, stop losses, proper position sizing, and reasonable profit targets ensures that a trader will keep his capital base intact and grind out profits quarter after quarter.

Once again, the key to success is building a disciplined approach – and then sticking with the rules throughout the turbulence.

Ashford Offers the Best of Both Approaches

At Ashford Capital, we incorporate some of the strengths from both long-term investors as well as short-term traders. Our goal is to buy residential real estate at the lowest possible price, and sell to developers at a significant profit.

From a short-term perspective, we’re acutely aware of the day-to-day market dynamics and how they affect real estate prices. When banks are in dire need of capital, we’re able to negotiate tremendous deals – buying distressed properties at fire sale prices. When the FDIC is saddled with a portfolio of illiquid properties, we’re willing to buy – but only at a significant discount.

Looking farther down the road, Ashford can afford to be patient, waiting for the very best opportunity to sell these properties to developers. Since we buy quality locations that will rebound in value quickly, we can be confident in the ultimate value of our locations and ride out a turbulent environment without hitting the panic button and selling.

Does your investment process have the discipline to ride through both good environments as well as rough periods? If not, why not?? In times like this, you owe it to yourself to have a carefully crafted plan and to manage your investments with the utmost care and diligence.

I would love to chat with you one-on-one and see if Ashford Capital can help you work to build a disciplined investment approach. Today’s environment offers tremendous opportunity – but you have to understand how to manage your risk and develop a long-term plan. Let’s have a conversation this week!

Wishing you every success,

Matthew J. Riedemann
Founder, President, & Managing Director
Ashford Capital Partners

[email protected]