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Monday, May 18, 2020

Difference between Investing and Trading

Difference between Investing and Trading 

Trading and Investing A Little Difference Make a Big Question To Public :

                                                                In the financial market, there are two major approaches to make money from the market the first one is Investing and the second one is Trading why I tell first one is investing means as of my opinion is better to beginners  who are entering and more passionate in stock market

Investing v/s  Trading :

Example 1: if you buy a share and hold its for a long-term, and you sold the share after 5 years is considered as investing, the quote of investor is buying right and sit tight.

Example 2:  if you buy a share and sold it's within one day or one hour its considered as trading, the trading is done within a day (up to market closes) its take time duration one minute, one hour, or maybe few hours its decision taken by the trader.

Aim:

the trading and investing are different approaches of creating wealth in a financial market, the aim of an investor is to create a long-term capital appreciation in the equity market, this is a long-term period, they receive the benefits of bonus-stock splits etc..

The main aim of a trader is to create short-term profit gains within a day or a week, the generates short-term profits and sell their stocks, but they have a high knowledge of about the market.

Both the trading and investing is depended on the attitude and knowledge of a person, both sides the profit-generating has an equal opportunity.

Charges:

if you are looking into both sides in the stock market you want to know the charges in trading and investing, there are several stockbrokers in stock market full service and discount brokers, the investing have a big amount to invest and have a sound investment for the long term they have high charges according to their brokers

And coming to trader point of view they don’t need a high amount of money to trade, but the charges for trading is less than investing, according to their stockbroker or financial institution.

Account maintenance:

For the investor must need a demat account and trading account to hold the stocks for long-term, but the trader no need to open a demat account they have open only trading account the demat account is not required for a day trader

Trading Advantages:

  • their investment gets back on the same day.
  • the money required for trading is small.
  • the charges will be less than delivery or invest.
  • the high margin is available.

Trading disadvantages :

  • they can’t get a long-term benefit of a company.like bonus ,stock splits,dividends,rights issue etc..
  • there is a time frame to sell their stocks within a day it may be loss or profit
  • risk status is higher than investing
  • the trading as a mental tension when a price falls and raises

Investing advantages  :

  • they can get long-term benefits for a company. Like bonus ,stock splits,dividends,rights issue etc..
  • risk status is less than trading
  • they have an emotional control capacity
  • all type of shares traded in all segments.
  • There is no time limit to sell a stocks

Disadvantages of investing :

  • Picking the good stock is difficult
  • High brokerage charges.
  • Want to analysis whole company fundamentals in past and present and future perspective.

 

Trading

Investing

Aim/goal

The goal of the trader is to gain maximum profits within a day or a week

The investor is to create wealth over a long-term period

Benefits

The trader doesn’t benefit the company bonus etc.. he/she involves only buying and selling the shares benefited the short term profits

Investor benefited the company ownership, bonus, stock split and rights issue etc..

Fluctuations of a market

Daily market fluctuations are affected to the day trader

Market fluctuations don’t affect the investor

Back-up /protection

A trader has a stop loss tool to protect their share

Investor follows the news regarding the company and holds the stocks

Analysis /indicators

Trader involves only the technical analysis like charts and indicators (RSI, MACD, volume) etc….

The fundamental analysis involves in investing like EPS, P/E ratio etc..

Time duration

Short term period

Long-term period

Risk

High

Low or medium

Belief/trust

Trust the indicators and market news

Trust the past and present and future performance of the company

Expected returns

5-10%

8-12%

Brokerage charges

Charges will be low

Charges will be high and moderate

Accounts required

Trading account

Demat +trading account

Bottom line :

                       Trading and investing is both are different approaches on the same path, both ways are good in making money from the stock market

My suggestion if you are spent time daily in stock market if you go through trading, if you can’t more time on trading no doubt you proceed to invest, moreover if you interested to read the financial news and accounts etc.. investing is the best approach for you, if you good in charting and trends better trading is good its all totally depends on the ability and knowledge of the person and finally make one decision.

Thank you


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