Today were going to bring you a short blog about the difference between trading and investing. These two terms are used on Wall Street every single day and used in practically everything that refers to stocks and the stock market. The fact is however that they are very dissimilar, are definitely not interchangeable and are quite different in terms of how they will affect you financially. While today’s blog will be relatively short it is actually going to bring you some vital information, especially if you are new to either one. Enjoy.
First a couple of definitions. Trading, for the most part, means moving in and out of specific positions over a relatively short period of time. This can sometimes occur in the same day. Investing is something that you do over a much longer period of time, usually a year or more.
Most financial experts will tell you that, unless you’r’ an actual trader working on Wall Street, you should be much more focused on investing then trading. Trading, although if done well can provide a lucrative short-term return on your investment, is very risky and best left to professionals who have been trained in the market and half a good bit of experience. Investing is for people who want to use their money over the long term to make more money and usually involves setting up a portfolio with different investments including stocks, bonds and so forth.
The fact is, there are many obstacles that you must avoid if you are going to trade and you have to watch your positions in the market intently. In fact, it’s so intense that you do more than likely have to quit your full-time job and just follow the market if you wanted to be successful.
Investing in the stock market has its obstacles also, of course, but the fact is that when you make an investment in a stock you are looking for that stock to gain value over the long run and increase your investment. Most people will hold on to their stock investments for a long time as they gain in value whereas most traders may only own a specific stock for a few days and sometimes even only a few hours.
As you can see there is quite a difference between the two terms. Trading in the stock market is something that takes experience, knowledge and a good bit of conviction as well as nerves of steel. Investing on the other hand, while it still takes a good bit of knowledge and a certain amount of experience, isn’t nearly as risky and will won’t force you to watch your stocks constantly. To put it another way, trading is more like a full-time job whereas investing is more like a hobby.
As we said, today’s blog is short but sweet. Knowing the difference between these two terms can make quite a bit of difference in how you perceive the market and how you proceed with your financial plans. We hope it has been enlightening and we hope to also see you back here again sometime very soon.