The title of this article might surprise you, if you're familiar with my writing or the investing perspective of The Motley Fool. We both have long advocated slow and steady investing, parking money in solid growers and aiming to hang on to our shares for many years. I've owned my Linear Technology
So why am I suddenly urging you to be a trader? Well, it's because I'm not using the word in the usual way here. I'm not telling you to become a day trader. Typically, we think of trading as buying and selling stocks. Instead, try thinking of it as exchanging one thing for another.
Money and opportunity cost
Any time you spend money, you make a trade-off. By choosing something to buy, you give up the opportunity to buy something else with that money.
That simple idea can have huge ramifications. At a national level, the federal budget always spurs controversy about whether money spent on something wouldn't be better used elsewhere. Closer to home, rising fuel costs forced many families to choose between spending enough on food versus gassing up the car.
A different kind of trading
We can apply a similar way of thinking to our investments, too.
For example, if we have $5,000 to invest, we could plunk it into shares of Cisco Systems
Similarly, if you're planning to sell a stock -- whether it's a top performer like Monsanto
Say you'll receive $10,000 in cash upon the sale. Will you park that in a bank CD? If so, is it the best move for you to shift funds from America's agriculture-and-seed future into a stable low-interest rate vehicle? If you're selling Nordstrom shares, do you really want to trade in the future of upscale department-store retailing for something else -- perhaps a used car? Maybe you do want to do that, but take some time to think about it. Pay attention to what you're trading away for what, and what your other alternative moves are.
Spend some time thinking about what the real value is of various money moves. Take note of what you're trading for what. I did so a few years ago, when I asked, "Does Your Fun Cost Too Much?" It's a question you have to ask in deciding whether you should work or stay at home with your kids, and you should consider it every time you think about buying lottery tickets. You might also explore what it means to be a "value investor" -- because they tend to be the ones most fixated on a stock's true value.
If you spend $2,000 on a big, flat-screen TV, know that you may be trading away the chance to invest $2,000 in the stock market. If it grows at the historic annual average rate of around 10% for 25 years, it will top $21,500 in value. Is that a fair trade, just for a big TV? Maybe so -- but maybe not, if you think about it.
Longtime Fool contributor Selena Maranjian owns shares of Linear Technology, Starbucks, and Microsoft. Starbucks and Microsoft are Motley Fool Inside Value recommendations. Starbucks and Linear Technology are Motley Fool Stock Advisor picks. The Fool owns shares of Starbucks. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.
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