Posted by chongkonghui > 2012-10-26 11:27 | Report Abuse

For me:

Trader seldom collect dividends; Investor always look for dividends.

Trader has short timeline for each stock; Investor may have years in mind.

Posted by kcchongnz > 2012-10-26 11:29 | Report Abuse

Capital appreciation is not the prime motivation for investing? Really? What kind of investor is that?
When one invest in a stock, how much return would he expect by placing his capital at risk? How much is the “income over time” contributes in the total returns in general, 3%, 4%? Jeremy Seigel in his book “Stock for the Long run” shows that on average, dividend yield for stock is about 4%. Is that close enough to your expectation as an investor? Not me certainly.
Value investors analyze the intrinsic value of the business of a company and invest in its stock when it offers for sale at a significant margin below their intrinsic value in the hope that this discount would disappear when more value investors notice and bid up the price in the future. They then sell it at a higher price when the discount narrows or disappears based on its intrinsic value then. Hence it is not true that “An investor will buy a company’s stock with no predefined notion of when he or she will sell, if ever.” Of course the investor may take a long time to exit from his investment, or he may not exit at all if the value of the company goes up at a faster pace than its price. In this case, the dividend income contributes a significant portion of the total return which a value investor is looking for.
I think the difference between trading and investing is more of price versus value. Traders merely look at price of a share and would bid up its price in the hope that they can sell it to an even higher bidder, or relying on the greater fools theory; whereas investors consider the value of a company, and whether the price offers good value as an investment. To sum up what Benjamin Graham said,
“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operation not meeting these requirements are speculative”