Category Archives: Trading

Mark Cuban Talks Trading Realities on CNBC Squawk Alley – Fantastic Interview

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“If you really think of it, when a stock doesn’t pay dividends, there really isn’t a whole lot of difference between a share of stock and a baseball card. If you put your Mickey Mantle rookie card on your desk, and a share of your favorite non-dividend paying stock next to it, and let it sit there for 20 years. After 20 years you would still just have two pieces of paper sitting on your desk.” Mark Cuban

In a fantastic interview this morning, Mark Cuban said on CNBC “Squawk Alley” that he “believes the Reddit traders who helped spark the GameStop short squeeze and subsequent stock surge will remain a force in the market”.

“I always was taught, ‘You get long and you get loud,'” Cuban said. “You get out there and create more buyers for your stock and the stock price goes up and that’s exactly what’s happening here, except it’s just WallStreetBets that’s doing the ‘getting loud.'”

Cuban said he believes those online investors have gained valuable knowledge from the short squeeze, as well as from the volatile cryptocurrency market. “I think this is real,” said the “Shark Tank” investor and owner of the NBA’s Dallas Mavericks.

“I think now that they’ve recognized their power and now that they’ve learned some lessons, we’re going to get more of it, not less of it,” he added. “It’s not going to be a set of circumstances where all these people lost money, they’re going to go home with their tail between their legs and they’re never going to do this again.”

Cuban piled on during his interview with CNBC with remarks that some investors might regard as heresy.

“The narratives that we create to sell stocks — price earnings, right, discounted cash flow, those are all subjective,” Cuban said. “We just have been told by Wall Street that the lower the price-earnings ratio against your growth rate, then that’s an indicator the stocks’ going to do great things. Or Graham and Dodd in terms of asset valuation — that doesn’t necessarily hold in a digital environment in the way it did in the past.”

When pressed by the interviewer about his comments, Cuban remarked, “Yeah, they used to trade salt for gold, too,” Cuban replied. “Things change.”

References:

  1. https://www.msn.com/en-us/money/markets/this-is-real-e2-80-94-mark-cuban-says-reddit-traders-wont-go-away-just-because-they-lost-money/ar-BB1djUfc?ocid=uxbndlbing
  2. https://www.mediaite.com/news/mark-cuban-tells-cnbc-he-supports-reddit-traders-to-gen-z-thats-what-makes-perfect-sense/

Trading vs. Investing

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Trading and investing are two approaches to participating in the stock market. Each approach brings its own opportunities and risks

  • Investing involves buying an asset you expect will rise in value over the long term, with the goal of long-term gains.
  • Trading, on the other hand, is about timing market short term moves and buying and selling stocks within a short period for quick returns.

With trading, you’re hoping to earn quick returns based on short-term fluctuations in the market and stock price. Long-term investors, in contrast, tend to build diversified portfolios of assets and stay in them for the long term through the ups and downs (volatility) of the market.

Investing basics

Investing is geared towards managing and growing wealth in the market over a longer period of time like years or even decades. This means buying securities with a long-term outlook in mind and holding them through both market ups and downs until you reach your financial goal or are near the end of your investment time horizon.

Investing involves putting money into a financial asset (stocks, bonds, mutual or exchange-traded fund, etc). that you expect will rise in value over time. Investors generally have a long time horizon and predominantly look to build wealth through gradual appreciation and compound interest.

Diversification (owning a mix of investments) is important for investors as it can reduce their risk — mainly by mitigating the effects of volatility.

Trading basics

Trading is all about making frequent, short-term transactions with the goal of “beating the market,” or generating greater returns than you’d expect to receive by buying and holding over a longer time frame.

Trading involves buying and selling stocks or other securities in a short period of time with the goal of making quick profits. While investors typically measure their time horizon in years, traders think in terms of weeks, days, or even minutes.  

Two of the most common forms of trading are day trading and swing trading. Day traders buy and sell a security within the same trading day; positions are never held overnight. Swing traders, on the other hand, buy assets that they expect will rise in value over a matter of days or weeks.

Trading can be a risky endeavor for the uneducated and unskilled trader. If a trade goes against you, you can lose a lot of money in a short period of time. If you have a low risk tolerance and want to avoid volatility, investing will be the way to go. But if you’re more of a risk-taker and would like the chance to earn bigger returns, trading could be appealing.

https://twitter.com/jrdorkin/status/1332382094048202753?s=21

Takeaway

Although the terms — trading and investing — are often used interchangeably: trading focuses on short-term buying and selling, while investing involves buying and holding securities for an extended period of time.

If you’re comfortable with the risks, trading a portion of your money can be rewarding and could lead to higher returns. If reducing risk and volatility are your main goals, then you’ll want to stick with long-term investing to build wealth.

References:

  1. https://www.ally.com/do-it-right/amp/investing/trading-vs-investing/?__twitter_impression=true
  2. https://www.businessinsider.com/trading-vs-investing