Investing or trading?
I was chatting to a potential client the other day and he asked me a great question. Is the Revolution a trading or an investment strategy?
I have been asked this before and it’s an excellent question because both of those terms have certain connotations that may make you more, or less likely, to want to learn more about the strategy.
So, first up, what’s the difference between a trading and investment strategy?
Well, both investors and traders are looking to make money out of the financial markets. But there are some key differences.
Investors tend to accumulate stocks over an extended period and hang onto them for the long-term. They don’t necessarily have a specific plan for buying and selling their shares and may often be as interested in the dividend income as any eventual gain in the share price. Investment strategies tend to focus on shares, bonds, funds and the like.
On the other hand, traders tend to operate on much shorter time frames and will jump in and out of the market according to a pre-determined plan or set of rules. These rules may be cast in stone or open to interpretation and traders often aim to make money if the underlying market is going up or down. They may well trade a wide range of securities including shares, currencies, futures, options and even crypto-currencies.
So, which camp does the FIRE Revolution strategy fall into?
Well, in its most basic guise, I would definitely say that it is more of an investment strategy…but with a trading overlay.
We look for the biggest, most boring — and hopefully, dividend yielding — shares we can find and are happy to hold them for the long-term if necessary whilst riding out any short-term fluctuations. So, that’s definitely an investment strategy.
On the other hand, we use cash-secured puts and covered calls to allow us to get into our share positions at a pre-determined discount and exit at a pre-determined profit, whilst being paid handsome premiums for our trouble. So, that’s the trading overlay.
I like to think that we have taken the best aspects of a long-term investment strategy and turbocharged them to produce outsize gains and reduce the risk of simply buying and holding shares.
However, if you are looking for a little more excitement then it is certainly possible to — and a number of our clients do — trade the pants off some of the more volatile US stocks using exactly the same principles.
It’s totally up to you.
If you are keen to find out more then our next group coaching programme starts in September. Or, you can enlist in the On Demand course immediately. Why not have a look at both options on the website or drop me a line to discuss it further.