Ask Colin

Should we have two portfolios: a investment (long-term-buy-and-hold income producing) portfolio and a trading (short term) portfolio?

This is an approach some people take. In fact I recommend it to people who have a compulsion to trade. It seems only sensible to me that they learn to trade on a small part of their funds and leave the balance safely in the hands of investment professionals. Of course, they can invest it themselves if they have the skills and experience.

However, my experience is that to run two portfolios like this is very difficult. It requires that you be very disciplined. You need to have two clear plans and clear separation of the two accounts on paper and in your mind. One of the most difficult dilemmas is when you have a stock in both portfolios and you need on your plans to sell it in the trading portfolio, but not in the investment portfolio. It is very easy to get screwed up psychologically in these situations and end up breaking the rules of one plan or the other.

If you are still learning to trade, I feel it is better to focus on that and not try to learn investing skills at the same time. I would only do as you suggest if you already have skills and experience with investing. If not, it would be best to learn to trade first and then start to learn to invest - unless of course you find you can do better trading all of your money rather than investing it. Unless this is a possibility, you have to question why you are learning to trade. Remember that most people do not end up putting in the effort needed to learn to trade successfully.

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