• MJ

INVESTING vs TRADING vs PORTFOLIO MANAGEMENT (PM) vs WEALTH MANAGEMENT (WM)

Updated: Feb 7




Today, I wanted to try another post as I'm spending all days in front of my 6 screens now (I only take breaks for sport, eating, and sleeping vastly reduced). I did tell you that I will dedicate myself entirely during these 10 days. I expected around 0.5% a day, but we will likely average double that. So far we had 8/9 green days (my fav colours). 1 day in red where we "lost" 0.5% (buying day, so mostly spreads killed us). The best day was c.5% on Tuesday. Tomorrow will conclude the 10th day of research before the "rocket launch" that I have been talking about at the beginning of the month. With that, my official race against @Elcarbonez is also starting. We have to compete with lower risk, but we have more screens :)


As I have been making so many moves to reshuffle and rebalance the portfolio and introduce many new stocks, let me take the 4 main areas of finance. 2 of which we talk a lot about here - Investing vs Trading. 2 of the others I have never seen anyone speaking about on eToro, but that's where I see myself much more. Let's go then.


1. TRADING


Probably the easiest to understand. The main difference between trading and investing is a longer time horizon. There will be many definitions, but basically, trading is short to near term vs investing is long term. Naturally, there are various types of trading, from day trading, swing trading, algo trading, and many more. For the purpose of this post, we will just stick to short term positions.


EXAMPLE: Most of my shorts are trades really. They have investment macroanalysis attached to them. You know that fundamentals are the most important to me. I need to adapt TA and news momentum to short well though. Why? Because shorts are CFDs and therefore incur fees. Given that I want to generate you the maximum return, I cannot afford to sit on a short forever. So far my best short was on $AML.L (Aston Martin Lagonda Global Holdings PLC) even though I love the company. 3X in 7 days (no leverage).


2. INVESTING


Over 80% and actually close to 95% of my positions are investments and not trades. You've seen almost all positions (with the exception of this week when I decided to up the game) in my portfolio for a long time. Sometimes I increase them, sometimes I trim them, all based either on the changing fundamentals, momentum, or (most frequently) need for cash. $PAH3.DE (Porsche Automobil Holding SE) and $AMS.ZU (Ams AG) are some of the best examples.


3. PORTFOLIO MANAGEMENT


This is exactly where I see myself here on eToro. I do not really do neither trading nor investing. Practically all I do here is research and risk management. I constantly optimize the portfolio to generate a higher return with lower risk. Although the Risk Score on eToro is completely off in my opinion, I do have to be within the range of 5-6. It's prudent on eToros side to limit the PIs, but naturally, that changes the game completely. It is very disturbing to me that instruments such as Gold and Silver increase the score rather than reduce (!?!), but hey, it's not a trading desk at Goldman.


In the future, you will actually see a Risk Score about halving. I checked my investor's drawdowns here since May and they are 1/2 of what you see in my stats. The very simple reason for that, I bought Porsche during COVID and it went down, which was actually extremely good news for me as I kept buying more and more and more. Did a small fortune on this solid stock :)


4. WEALTH MANAGEMENT


This is where my expertise and experience lies. I used to do it for Reuters for 6 years and it stayed with me. This is also what I do outside of eToro. I absolutely love it. The main difference between Private Banking and WM is that PB is starting around 1M whereas WM starts at about 30M. UHNWI are those with 30M$+ of INVESTABLE ASSETS (property, cars, etc are not investable assets by definition, investable assets are cash and liquid positions/cash equivalents).


Naturally, there’s no scope for WM on eToro, but what I do for Copiers here is close to PB. The biggest advantage of the platform is that it’s free for Copiers, whereas you pay 2/20 to a Hedge Fund (which is actually the closest to what we’re doing here).


If any of you are interested in WM, please let me know. Just got a Picasso as a broker for €55m. WM includes properties, planning for kids' educations, buying (and more importantly running) a boat or a jet, tax structuring, art, jewelry, gold, and many other things. Stocks are always a part of it, usually the one that’s needed for liquidity, which usually varies between 10 and 30%.


EXAMPLE on eToro would be holding $AOX.DE (alstria office REIT-AG) I much prefer it to own multiple properties (which I sold not so long ago) as it gives me better return and no hussle. You can also own $GOLD and although I’d recommend a physical form if you can, it’s an OK alternative.


Anyway, I went on for a bit, but I hope it’s at least a little useful? Do let me know whether it is or not.


Sending my best regards,

MJ


PS. All my investments and portfolio are public. To join eToro please follow the link: https://bit.ly/3i7Yo3C

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