Trading vs investing
When it comes to wealth creation in the stock market then trading and investing are coming of the field. Trading and investing two different methods to create profit.
Trading is a skill whereas investing is an art. Investing helps the marketers to gradually build wealth over an extended period of time.
Trading is the buying stock with the intention of selling them for a profit within an minutes, hours, week or month.
Investing and trading both have strategic to create wealth from equity market.
Meaning:
Trading is an act of conducting a risky financial transaction, in the hope of substantial profit.
The purchase of an assets with the hope of getting returns is called investment.
Basis:
In trading, technical chart such as candle stick, technical indicator and market psychology.
In investing, fundamental factors that is the performance of the company.
Period:
The trading is the process of holding stocks for a short period of time. Generally it can be for a month or for a week or for a day. So, traders are holding the stocks for short period of time.
Whereas, investing is the method of holding the stocks for a long period of time. Generally it could be five years or ten years or even more than ten years.
"In the short run, a market is a voting machine, but in the long run it is a weighting machine".
- Benjamin Gramham
Capital Growth:
In trading, traders follow the price movement of stocks in the stock market. If price goes up, traders sell the stocks. In this case, income is uncertain.
Investing is an well formulated plan of creating wealth by compounding in
interest and dividend over the years by holding quality stocks in the stock market. In this case, income is stable.
"People who invest, make money for themselves; people who speculate make money for their brokers".
- Diam Nobis
Risk:
Normally, both trading and investing put their money at risk in the capital market. However, trading comparatively involves higher risk compared to investing.
In investing involves comparatively lower risk compared to trading. Remember stock markets are subject to market risk.
"Risk comes from not knowing what you are doing".
- Warren Buffett
Returns:
In trading involves higher risk factor, it also comes higher potential returns as the price might go high.
In investing involves low returns in short term but might deliver higher returns by compounding interest and dividend if held for a longer period of time.
"Price is what you pay; value is what you get".
- Warren Buffett
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