Investing and Trading, the two different ways to increase your Wealth

August 28th, 2017 → 10:40 am @

Investing and Trading are different methods to get profit in financial market

 

Investing and trading are the two different methods to get profit in financial market. The aim behind investing is to slowly increase your wealth over a long period of time by buy and hold of a portfolio of stocks, bonds, mutual funds and other investment instruments. It will take an extended period of time to get benefit from Investments such as a period of years, or even decades. Investors will "ride out" the downtrends with the expectation that prices will return and any losses will eventually be recovered when the market is inevitably fluctuate. Investing works on the buy and hold principle. Market fluctuations are not affecting the investors.

Trading on the other hand involves the more frequently buy and sell commodities, stocks, currency pairs or any other instruments with the goal of getting out perform buy and hold investing. While investors seeks the 10 or 15% annual income from their investment, but traders seek a 10% income per month. We get profit from trading by the process of buying at low price and selling at high cost with in the short time. The reverse is also true that the selling at higher rate and buying to cover at a lower price, short selling, to overcome the loss at falling market. Traders can use technical analysis to make profit. Traders look at the price movement of the market.

Undoubtedly both the investing and trading has the risk factors on our capital. Trading involves high risk and potential returns as the movement of price in a short while. Investing is an art, it has lower risks and lower potential returns. In another words we can say that trading is a one day cricket match, but the investing is like a test cricket match. Traders put money in stock for a short time to get higher profits. Missing the right time in the market may lead into lose. Traders study about the performance of the company to hit the higher price and book profit for short time. Investors invest for long time and keeping an eye on the profits.   They patiently wait till the stock reaches its potential.

An investor looks at the fundamentals of the companies before buying a stock. A fundamentally good running company yields for the couple of years. And it is expected so in the future also. The best strategy for an investor is to select a few good companies and invest in them. A trader is concerned with the short term fluctuations in demand and the supply of the stock. The tool most often employed by a trader is charts of various types.  What is trading and what is investing? This is long time confusion among a large number of people. Investing in one hand is like buying and holding an asset for long time means more than 10 years. On the other hand trading is buying a stock for two three days and sell for small profits. Trading need time and patience and little tension. Investors need no time and they are tension free.

Following are some good reads for traders. Go through it.

 


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