Trading and Investing are two different genres of the market and both of them involve putting the saved money into the stock market for earning some return at a certain period. Both the methods of earning profit pursue their goals in different ways and hence these terms can easily be confused with one another for beginners in this field. The following points define the difference between traders and investors clearly:
- Trading involves the buying and selling of the stocks frequently and generating profits at shorter time intervals. While investing means buying the stocks and commodities and holding them for a longer period and waiting for the perfect time to make a profit.
- Traders buy the stocks and commodities and try selling them the same day or within a few days at a higher price, to make a profit. They make this a daily practice and do not want their money to be stuck in the same stock for a longer time. However, it is the opposite of investors. They research the stock that they want to invest in and then buy those shares at a reduced price. They believe that the price will increase over a few years and a significant profit can be earned as a fruitful return for their money.
- A trader and an investor have different sets of minds and needs for putting their money in the stocks and commodities. An investor wants to invest the money without any risk of losing and does not want to invest any time or energy regularly to watch over his investment. He can wait for the investment to earn a healthy return over a few years and wants to build his wealth without any risk or uncertainty. However, a trader is different in this regard. He trades in the stocks and commodities daily and puts his time and energy every day to earn some return. He is a risk-taker and knows that there are profits along with some uncertainties when trading in the stock market, He finds this quite entertaining; as once you get a hang of the market, the chances of profits increase over a period.
- Investors are rewarded in terms of dividends, stock splits, preferred interests, and many more ways for creating wealth through the compounding of the interest. For traders, it is about entering and exit the market at the right time.
- Investors do not trade frequently in the market and hence the involvement of brokers is not required much. However, traders buy and sell very frequently and hence they have to pay huge brokerage charges often.
Trading and investing both are successful ways of getting rewards from the stock market. However, it depends on a person’s attitude, time and involvement, risk-taking capacity, knowledge, patience, and preference to decide their approach of investing in the stock market.