Traders look at the price movement of stocks in the market. If the price goes higher, traders may sell the stocks. Simply, trading is skill of timing the market where as investing is an art of creating wealth by compounding interest and dividend over the years by holding quality stocks in the market.
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When it comes to wealth creation in equity market, investing and trading are the two genres of the field. However, investing and trading are very different approaches of wealth creation or generating profits in the financial market. Imagine, today, you and your friend bought equal amount of seeds to sow in your fields but you sold them to someone in a day because you could earn profit. And your friend sowed the seeds and let them grow for a few years till they gave new seeds. He sowed the new seeds and continued this for years and sold a lot more seeds eventually than were bought.
Let’s learn it this way, trading is a one day cricket match while investing is a test cricket. You would watch skillful players in the team who are expected to strike fours and sixes to score higher in a one day match. Whereas, the art of the game is seen in the test match! Similarly, traders are skilled, technical individuals who time the market and learn market trends to hit higher profits in the stipulated time. It is related to the psychology of the market. Investors on the other hand, analyze the stocks they want to invest in.
Undoubtedly, both trading and investing imply risk on your capital. However, trading comparatively involves higher risk and higher potential returns as the price might go high or low in a short while. Since investing is an art, it takes a while to develop. It involves comparatively lower risk and lower returns in a short run but might deliver higher returns by compounding interests and dividends if held for a longer period of time. Daily market cycles do not affect much on quality stock investments for a longer time.
Traders put money in a stock for a short term. They buy and sell fast to hit the higher profits in the market. Missing the right time may lead to loss. They look at the present performance of the companies to hit the higher price and book profits in short term. Investors keep themselves away from the trends and invest in value. They invest for a longer period of time keeping an eye of the stocks they hold. They patiently wait till the stock reaches its potential. Ultimately, the ones who achieve their financial goals are successful!
Trading is a method of holding stocks for a short period of time. It could be for a week or more often a day! Trader holds stocks till the short term high performance, whereas, investing is an approach that works on buy and hold principle. Investors invest their money for some years, decades or for even longer period. Short term market fluctuations are insignificant in the long running investing approach.
Both saving and investing are important, but they are not the same. While both can help you build a more secure financial future, customers must understand the differences and know when to save and when to invest.
Savings are usually placed in low-risk savings account. Those looking to optimize their earnings should aim for a savings account with the highest annual percentage yield (as long as they can meet the minimum balance requirements).
“First and foremost, both include saving money for the future,”
Both savers and investors recognize the value of getting capital set aside.
Investing is not magic. Remember that ...
If you can stick around long enough and keep learning, you will be successful at this game. Learn the basics and practice.
An investment is a gamble: instead of the security of guaranteed returns, you're taking a risk with your money.
You can invest in Shares, Bonds, Funds, Government bonds (gilts), UK property market or even Farmland, Vintage cars, Wine, Fledgling technology, firms or art.
For most, investing means putting money in the stock market.
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