as a beginner, when we upto start our investing journey in stock market we can find two types of people there, with different mindset and perspective to earn money out of stock market. while interacting with these investors the first one will say that you can earn 10,000 to 20,000 rs and even more on daily basis by doing trading i.e. buying and selling of companies stocks.
however, the another investor will says that you don't have to keep on buying and selling the stocks of the companies, rather than that you can simply buy and hold the companies stocks. so that you can earn good returns in long tern and it may also helps you to create a good wealth out of stock market. as market fluctuations won't affect due to long term investment.
but, investing for short term or making intraday trading could sometimes become risky because of huge volatility in market and changing government rules and regulations. so if you're here to know about what is the difference between trading and investing? then you can read this article as it might clear a vast portion of your doubts. this article also contains some of the other aspects related to trading vs investing which you must aware of.
difference between trading and investing.
trading vs investing.
the bottom line.
difference between trading and investing.
by reading this you might get to know about which option is better for you either it is trading or investing. where does an investor make more money either by taking lower risk or by taking higher risk.
1. time period.
while investing in stock market the major perspective of the trader is to earn high and higher profit from stocks even in short term basis and for that reason he used to follow unethical tactics i.e he did not follow value investing tips and used to start different trading strategies like intraday trading, swing trading, momentum tradings and so on.
whereas, an investor never invest his money for short term basis, these investors used to think of their money as time and follow value investing tips and for that reason they have long term perspective, so that they buy the stocks of companies and hold them for long term and let the stocks grow organically which helps them directly to grow their initial invested capital.
2. mindset.
mindset is also an important factor that creates the difference between trading and investing, as the major perspective of the trader is to earn money out of stocks in short term, and it doesn't matter for him what are the returns on the total invested amount, as the trader has the mindset of making profit only which makes the trader also a speculator.
however, an investor have a growth mindset he can simply buy the stocks of companies and let them grow just by holding them for long term basis. they avoid speculation or frequent buying and selling of stocks as they give priority to the stocks that they purchase let the stocks compound automatically, however they sometimes purchase majority of stocks at market dip by analyzing the companies financials and fundamentals.
3. risk involved.
as a beginner or even for a experienced trader it is always suggested by successful investors to follow value investing rules to survive in the market. but the traders used to follow the trading path and assume the market as a speculation tool to make money in short term. as it involves high risk due to high market fluctuations, trading is more risky as there are are huge chances of losing capital money.
however investing does not incur higher risk due to long term holding and consistent buying and averaging of stocks. it actually helps the investor to resist even in market up's and down's, due to long term holding the short term market fluctuations won't affect the investors capital and helps to create a good wealth in long term.
4. point of benefit.
for a trader, volatility is the major thing to earn higher returns from stock market, the higher the market fluctuates the greater the chances of making good profit. however it also incur higher risk, because a single wrong decision can leads to lose of initial capital. so volatility is the major requirement for a trader to make money out of stock market.
and for an investor stability is the major requirement to make money from stock market. according to a well known investor mr. warren buffet investing in a company with low rate of change is a good company to invest rather than investing in a company with higher rate of change. because a company with higher rate of change never works stable which may cause a huge risk in long term. so investing in a stable company is a good option for you to invest for long term. it is one of the major difference between this two options.
5. basis of analysis.
while trading in stocks a trader mostly used to follow technical analysis of the graphs and charts to get a projection that the graph will move upward or downward in near time. so that they can make higher profit even in short term.
however for an investor value investing is the major thing and for that reason they used to follow fundamental analysis of companies while investing. they read companies financials, its past performance, its working nature, swot analysis and so on. this thing helps them to hold their positions for long term because if the financials of the companies are strong enough then it can sustain in long run.
6. capital appreciation.
capital appreciation is one of the major reason of investing or trading in stock market, but the perspective of earning this profit is different for trader and investor. the trader basically use his initial capital to build more capital and again he invest his capital to again build more capital but this consistent buying and selling of stocks make it risky.
as an investor the major priority for him is to grow his initial capital and for that reason he used to buy and hold the stocks to grow his invested capital as time passes through. buy and hold also have various benefits rather than trading.
trading vs investing.
advantages for trading.
trading have very few advantages as it includes more risk then benefits, so the first basic advantages of trading is of making money even at a short amount of time. and the other advantage is that you can bear risk for short period.
disadvantages for trading.
on the other hand, the disadvantages of trading is high as compared to advantages of trading. the major disadvantage of trading is high risk due to short term trading and market volatility. the next disadvantage is it requires more time as compared to investing, here it requires continuous spectator so that to know the upcoming trend in the market and rather than that it also contains huge stress for trader due to the fear of lose of initial capital.
advantages for investing.
the list of advantages of investing is higher as compared to trading, the major benefit of investing is capital growth. rather than that some of the other advantages of investing is taking lower stress, demand less time for analyzing the stocks, tax saving options and so on. there are some more benefits that an investor gets on his holdings are like dividends, bonus shares, etc.
disadvantages for investing.
as compared to advantages there are very few disadvantages of investing, here the major disadvantage is of long term holding, as it requires huge patience which most of the peoples don't be able to accept and lose it. rather than that holding your positions for long term may also cause for you to loose some good trades chances. so these are the some advantages and disadvantages of trading vs investing.
the bottom line for trading and investing.
in the above segment you must get to know about what is the difference between trading and investing. so it may also clears your doubt regarding the trading vs investing topic. now you may know that earning money from stock market in short term through trading is quiet simple but it si quite riskier as well because of high volatility and it can't help you in capital growth.
however following value investing activities can actually helps you to create a good wealth in long term as the major requirement for investing is to keep patience and holding your positions for long term. rather than these if you want to know brief detail about investing and trading then you can also read what is intraday trading or intraday trading tips. and for investing you can read what is delivery trading or delivery trading rules.
0 Comments