Traders and Portfolio Managers are two career choices within the investment field. Traders and portfolio managers both deal with stocks, bonds and other investment vehicles, but they do so in very different ways. Traders work for themselves or for a company to place and monitor trades of individual securities, whereas portfolio managers work to develop strategies that allow them to maintain profits or to develop profits over the long term.
What a Trader Does
The job of a securities trader is to buy and sell investment vehicles, either for a short term profit or on the advice of a portfolio manager. The vehicles that are bought and sold may include stocks, bonds, futures, options, currencies, or other types of securities. The trader may place buy and sell trades very quickly, often many times a day, or may buy and hold the securities for days or weeks.
What a Portfolio Manager Does
The goal of a portfolio manager is to select a set of investment securities that will provide income for a client over a long period of time. The portfolio manager wants to be sure that the portfolio maintains its value, and if possible increases value over time. The portfolio manager will choose from a variety of investments, but normally will focus on stocks, mutual funds, and bonds.
Differences between a Trader and a Portfolio Manager
The differences between the trader and the portfolio manager include differences in the timing of trades, the number of trades, and in some cases the focus on risk versus reward. Traders are often primarily focused on reward. They want to be sure to make a profit quickly for the client. They will get in and out of trades fast, sometimes on a daily basis, to be sure to seek out all possible profits. Portfolio managers work more slowly. They do a lot of research on their investments and may only trade several times a year, as they rebalance their portfolios.
What Traders and Portfolio Managers have in Common
Both traders and portfolio managers must be able to select investments wisely and carefully without letting their emotions get the best of them. They must be informed about the products that they are buying and selling and be ready to accept some losses. Both traders and portfolio managers must understand basic principles of supply and demand and economics.
Trader or Portfolio Manager
Whether you will prefer to be a trader or a portfolio manager will depend upon your energy level, your emotional state, your personality, and your goals. A person who is comfortable making quick decisions, who is ready to be on the job every minute, and who can focus from second to second without getting flustered will make a good trader. A person who is comfortable researching different options and making decisions that will take time to play out will make a good portfolio manager.