Hey! You're not an investor! Get outta here!

What an investor is NOT

Wall Street uses the word "investor" with reckless disregard for the true meaning of the word. To Wall Street, an investor can be many types of people. Often times, Wall Street confuses the investor with the speculator. In Security Analysis, Graham discusses this issue by stating investors judge "the market price by established standards of value," while speculators "base their standards of value upon the market price." Speculators essentially gamble on stock prices, hoping they will make money. Would you be comfortable with gambling on your stream of income for the next several years? I hope not!

Anyway, let me show you some examples of how Wall Street distorts the idea of the investor:

• T.D. Ameritrade Commercials - "Independence is the spirit that drives America's most successful investors." Notice how TD's use of the term investor is contorted. If you have watched one of their commercials, it is easy to notice that the people depicted are clearly either "traders" or "day traders". Traders and day traders are NOT investors. Traders are speculators. They use methods like technical analysis, to see how the stock prices are moving, not how the value of the underlying company looks or has changed. The idea of being an investor is to focus on long term, sustainable gains. The trader keeps short term, weekly or monthly gains in mind. These gains are almost never sustainable for long periods of time. To top it off, individual traders drown themselves in trading costs and taxes inherent with buying and selling stocks frequently. Note: These costs and fees do not apply to institutional traders, as they work on Wall Street.
  

• E*Trade Commercials - I'm sure you've seen the TV commercials with the baby talking about how easy it is to buy stocks using E*Trade. This is another example of a trader. The commercial doesn't mention trading costs, valuation of stocks, or even thinking about what your buying. After all, if it is easy to buy a stock, that means you will make money right? Hah, I wish.

I realize these are only two examples, but can you see what I mean? Many "reliable" sources of Wall Street news will throw around the word "investor" when they actually mean "speculator". It is important to differentiate between these two, as I will only be discussing investing in my blog.


Traders and Day Traders

Now don't get me wrong, a skilled (and small) number of traders can and do make boatloads of money. The downside is that often times these gains are not sustainable over a period of decades, think 30 years. The long term is where value investing really shines.

One reason Wall Street does not generally like value investing is because it does not like thinking long term. Wall Street enjoys the daily, exciting, and drama-filled activities of the markets. I don't know about you, but I'm not really the kind of person who enjoys getting overexcited or depressed about daily occurrences that don't mean a whole lot in the long run. Wall Street loves to publish daily articles about what companys' stock is going up, where analysts think stocks will go, and why you should buy stock XYZ.

Please, don't just buy everything that Wall Street says (no pun intended). Think for yourself, and do your homework!