Should you buy or sell in the decline this week?

Depends on who you are: trader? Investor?

Before jumping to the conclusion, let’s take a look what is the difference between trader and investor?

Trader earns from stock price change: buy low sell high. The underlying mechanism of price change is driven by imbalanced demand and supply of stock from the market. Traders typically hold stocks from hours to months.

Investor earns from stock price change or dividend distribution. The underlying mechanism is driven by business operations (profit generated from sales and capital). Investors typically hold stocks over a year.

Being an investor sounds superior compared with being a trader, but it’s not. The two groups have the same goal: making money.

Traders need to focus on stock picking and market timing. Charting analysis and technical analysis are essential for traders to analyse stock demand and supply, find the pattern or trend.

Investors need to focus on asset allocation, understand business operations, and to a less degree the valuation. Financial analysis, risk management, and business knowledge are essential for investors to build a portfolio with the best risk – reward profiles.

Now back to the question, should you buy or sell in the tumultuous market this week? If you are a trader, maybe you should (or already) reduce your positions, no matter it’s to cut the loss or realize the profit. If you are an investor, maybe you should buy more stocks to rebalance your portfolio.

Ultimately, the answer is not about buy or sell, it’s about planning and execution, it’s about discipline and mentality.

Of course, the million dollars question is, are you a trader? Or investor? You have to be honest if you don’t want to lose money. So be yourself.