subject: Which One Is Better Investing Or Trading? [print this page] Its quite difficult to tell trading from investing, because both of them appear to be the same. Interestingly, it is only the investor/trader himself who can tell if some particular purchase of stocks was meant for investment or trading purpose. Even though the procedure is quite the same, you cannot mix them both because ach of them serve quite different purposes for the investor. In fact, mixing up both of them as the same is one of the biggest mistakes the novice investors make. They have no clear goal or plan in mind when buying stocks, they purchase some stock because they were selling like hot cakes, yet they are clueless when it comes to deciding the future course of action.
When you are purchasing some shares of the company expecting to earn good dividends and having no intent of selling it in near future, it will be considered investing. On the other hand, when you purchase a stock, expecting to earn some profits by selling it in near future as soon as the price appreciates, it will be called trading. Note that nothing stops you from selling quickly even if initially you were planning to keep it, or not selling quickly when you were planning to do so at the time of purchase. You are free to change your decision based on circumstances later on, but you must be having a clear idea at the time of purchase, for the reason that one must approach both investing and trading differently. As a general rule, an investor goes for the companies and industries that he/she thinks are set for a boom, while a trader is not really concerned about the companys prospects in longer term, all hes looking for is a short term increase in the price of the stock.
You can make from these examples that investor is the more serious and the more sought-after person in the financial markets because he invests and keeps his investments in the market for a longer period, whereas the trader is more like an opportunist (though theres nothing really evil or illegal in the practice). Knowing beforehand, if you are going for investing or trading, will allow you to choose the right stocks, because at times the stocks which are good for trading are not that good for investing purpose. In contrast, stocks which are good for long term investment are not good for trading, at all. People are more inclined to investing in stable markets and promising economic conditions, while they prefer to trade quickly in times of instability or some sort of unrest in the market
by: William
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