Difference Between Trading and Investing
Investing vs Trading :Smart people are those who save for unexpected circumstances. Recent example is 2020 and still continued in 2021 when we all are facing this pandemic. Our advice, save monthly, how much? Does not matter. Even a small amount of savings every month is good to go. How to save? We have much smartly planned option. 2 of them are through trading and investing.
And when we talk about stocks, we always get confused what to choose from among the two..
Lets say, You invest daily 10,000/ and get 1 Crore in Future. How by trading or investing?
Which is better and where is more money with low risk?
Well let’s understand.
When you buy an asset, you buy with a mindset to sell it in form of stocks, options, Futures, Bitcoin etc. and earn profit out of it. There are some traders who buy and sell stocks in a short period of time and take out profit from 1 or 2 percent of fluctuations.
Now when we talk about Investors, they don’t buy anything like Options, Futures, Bitcoin etc. They only concentrate on stocks. And hold them for long term say more than 10 years. As they believe that their stock price will go up.
Now, what is the difference between the two?
Trading is a short term investment, it can be for 1 or 2 days while Investing is long term investment. To be a trader you need to study technical analysis behind it but to be a long term investor, you need to study- growth investing, value investing, growth analysis
If we invest for a long term say 10 years and it turns out six times profit, then the CAGR return would be only of 20%. But if we use the same share for trading twice a year we can gain more profit out of it. In general, we can gain around 15 to 20% of gain from Large Cap companies on an average of 200 days i.e around 5 to 6 months. Since share price keep on swinging mode, that is the reason we advised to trade twice a year instead of going for 1 year.
So it is better to trade with the same companies where you plan for investing. But if you are new in the field and have very less or no knowledge, go for investing as only Financial intermediators are the ones who earn from you.
Here we advise you to take proper education whether you want to be a trader or investor. Invest your time to understand about stock market as it is not a part time game. Hope you like this article. Don’t forget to share your thoughts in the section below.