Trading v. Financial Planning: Do you know the difference?

Let me preface the following by saying that I DON'T recommend the following strategy to the average long-term investor for various reasons that I'll get into later. But, just for a bit, I'm putting on my trader hat, and then I'll talk about planning.

Short the Financials: If you're really on board with me that the financials are headed down in the short term, and are able to be aggressive right now, there's a leveraged short ETF play that I like called the ProShares UltraShort Financials ETF (Symbol: SKF). I plan to talk more about ETFs in future posts. Basically, This is a short equities fund that trades like a stock which seeks to profit from downward movement of various issues within the financial sector. UNDERSTAND comma however: It's 3x leveraged short and thus very aggressive--you could lose most of your investment if finacials take off. Right now, I don't own it, and of course I'm obligated to disclose if and when I do, but I'm watching it.

And now that I'm officially fully off topic; speaking of aggressive ETFs, as I said yesterday, I'm also bearish commodities, specifically corn, gold, and oil. As such, I do actually own the ProShares UltraShort Oil & Gas ETF (Symbol: DUG), which is a mega short oil & gas play that moves 3x Oil, and is as such not for the faint of heart...

Back to the point: Being primarily concerned with financial planning, I can't overstate the distinction between strategic financial planning on the one hand and strategic or tactical trading on the other. They are related but distinct concepts, and many people don't quite get the difference, and their portfolios suffer because of it.

To illustrate the distinction: Tactical, Short-Term trading, such as the ETF trade discussion above, is almost NEVER part of an effective broad financial plan. In fact, very commonly the urge to trade is the number one portfolio-killer! For lots of reasons, but primarily due to costs and poor risk management, it would be maniacally negligent to recommend that my clients make trades like this with any sizeable portion of their portfolio.

But, if you've got some play money lying around, and the wife won't miss it, then who am I to tell you not to gamble a bit on some sector moves?