Investing and Trading….Just Words.

I love investing and I love trading. The longer I do both, the more connected the two seem to be but in 2011, trading is the devil’s work while investing is god’s work.

I call bullshit.

As the world shrinks and everyone is connected socially, the line between trading and investing has blurred as well.

Today, startups have never had more access to capital (we could argue forever if it’s easier or harder to get) and they have never had a greater access to exits – corporations with cash and underinvested in technology and Second Markets (SecondMarket, Sharespost, Felix, Cantor….). We are not all born, raised or educated equally, but the tools to succeed as an entrepreneur, investor and trader have leveled the playing field.

There are two things that matter to me. One is access to capital which may never be equal but the web is making easier every day (see WordPress, Twitter, Stocktwits, Angel.co etc…) and attitude. Attitude is something you can completely control.

In the markets (public and private) you are competing against a lot of knuckleheads. Most have the wrong attitude and lose money. They than blame the system. Here is what a knucklehead with the wrong attitude to invest or trade sounds like (fresh from one of my blog posts):

So you’re bullish. How much do you want to bet that in three years time the Eurozone no longer exists as currently construed?? Sure equities can go higher as the dumbest of dumb money chases glad all you long only managers aren’t down for the year any more…. what’s your sharp ratio? How much are you up for the year? That’s what I thought. The real sad thing about these markets is that stupid people have been allowed to continue to manage money as government continues to subsidize sub optimal behavior. So take your wins now and act like a cocky d*ck. I’ll make sure to laugh my a** off at you when the market fails in the next 12 months and you are caught on the wrong side.

I would not let this person invest $5 for me and if I was a client that knew his real identity I would be frightened. The great news about the web is you can actually follow him. It may be worth it just to do the opposite.

In my home, I want Max and Rachel to experience the thrill (and opportunity costs) of ringing the register and investing in long-term projects. Max has his lemonade stand and Rachel has her reading. I wish Max read more and we are pestering him daily and we need to get Rachel to understand the thrill of the register. They also need to be in an environment that allows them to experiment and fail.

To get the best returns on your capital, do not pigeonhole your style with ‘words’.

I invested a lifetime of energy and thinking about stocks when I created Wallstrip, but when CBS acquired it 8 months after we started it, my investors had themselves a trade. I did as well. Wallstrip was a trade that started out as an investment, but the experience was an incredible investment.

I invested in Assistly which was 4 partners and an unfinished product, but 18 months later Salesforce acquired it so an investment I did not expect to see a return on for 4-10 years was now a trade.

I thought I would get a quick flip when I invested in the Rent.com series Q round in 2000, but it ended up being a great investment and people think I am smart.

Over the years I have had to call myself an investor and trader, now I just say let’s put money to work and have a plan and an open mind to change it tomorrow.

18 comments

  1. Yoni says:

    Those who know how to trade, trade
    Those who don’t, invest
    Those who are too afraid for that, advise …

    with realtime access to online trading rooms for free and high liquidity, every investor is a trader, just like every 12 year old today is a social media expert in terms of older people…

  2. Greg says:

    Find them, ride them and get off!  That’s a great investing motto.  I mean trading.

    It might not translate on a T-shirt though. :)

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      • Jay H. Mani says:

        Howard- Let me state that I enjoy your blog postings and thoughts about the market. StockTwits is a brilliant idea and I hope you will be able to monetize this well in the future. Now, the readers blog comment that you posted was dickish and needed some tact but you have to understand the context. We have been shown nothing but bullish predictions for the past 20 years, of which the last 13 or so the market as measured by the SPX has done nothing. Now many more bubbles do we have to blow? Why do continue to brow beat the bearish guys? It is Maarch 2000 and OCT 2007 all over again. I have lived as a bond trader as well as a market participant too many blow ups where the bears were never listened to. I heard it all in March 2000 when Infospace, MSTR, ARBA, CMRC, VERT, Digital Island, EXDS, and other crappy companies were flying and the bears angerily pointed out only to be shut up by the bulls. Same thing happened in the past crisis. We all know that Europe is finished. China and India economies will come down to a grinding halt as Central Bankers tighten policy in those economies. This doesnt bode well for the global investing landscape. I understand what you are saying that we have to “trade” the market but lets not all do the same things that hammered us in the past. People get angry and are dickish when the same crap happens all over again. When the same bill of goods are manufactured and sold like Synthetic CDO cubes. This is why the language is the way it is.

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