Trading or Long Term Investment – What’s More Suitable for You?

Trading or Long Term Investment - What's More Suitable for You?

If you are a newbie to the market, then till now you might have came across with two regularly used jargons used in the investing world that is trading and investing. Your friend or colleague must have asked you whether youre an investor or trader. Even I remember one of my friend telling me that if he books profit in a single day then he is a trader and if not, he becomes an investor.

So whats in these terminologies? What do they tell you? Lets just explore these concepts. These are not the complex concepts of the investing world but are very important and basic aspects and one should know them properly before getting into the stock market.

Basically, these concepts differ from each other in the basis of time horizons, intraday trading is nothing but investing for the short term. Trading involves the frequent buying and selling of stocks to maximize returns. One of the Famous trader George Soros stated that "Markets are constantly in a state of uncertainty and fluctuation and money is made by discounting the obvious and betting on the unexpected."

The statement itself suggests that trading is nothing but gaining from the small misprices in the market. On the other hand, in long term investing buy and hold strategy is followed. It is nothing but buying a stock at the right time and right value and holding it for years. Famous investor Warren Buffet has said in this regards that, I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.

Many a time, the new investor who enters the market has extraordinary expectations. This is the first mistake by which investors lose money. One should always have a fair return expectation as per the market performance. The second thing that rookie investors lack is knowledge which is why they are unaware of many things and they just invest blindly into stocks that are in news or are rumored to be trending. This is not the right method to invest in the markets. One should always have knowledge of either technical or fundamental aspects of the market.

So lets just compare these investing methods with each other and explore them

Period

The period is one of the basic aspects. As said earlier, trading is a technique of holding stocks for a short period of time. Investing is an approach that works on buy and hold strategy. Here an investor invests money for some years, decades or for an even longer period. In this case, investors are least bothered of the short term market fluctuations as they are immaterial while investing for the longer term.

Capital Growth

Traders concentrate only on the price movement and the patterns movements of stocks in the market. If we say it in a simpler way, trading is a skill of timing the market perfectly whereas investing is an art of creating wealth by compounding returns over the years by holding quality stocks in the market over the longer period of time.To know the quality stocks to buy for long term read Best Stocks/Shares To Buy For Long Term Investment For 2019.

Risk

Undoubtedly, both trading and investing have risks. However, trading is comparatively a high-risk affair which offers higher potential returns. Since investing is an art, it takes more time to develop the portfolio of stocks. It involves comparatively lower risk and are able to offer higher compounded returns in the longer run. Investing eliminates the risk of daily market movements due to the longer term holding approach.

Lets learn it in a more simpler way, intraday trading is nothing but just like a one-day cricket match while investing is a test cricket which checks your patience as well as your skills. You expect to watch skillful players in the team who can strike fours and sixes out of the ground to set high scores in a one day match. Whereas, you would like to see the defensive and strategic skills of the game in the test match! Similarly, traders need to be skilled, technical individuals who can time the market and grab the opportunities between the market trends to hit higher profits in a shorter period. While investors, on the other hand, analyze the stocks with the various fundamental attributes. Investing also includes a commitment to stay invested for a longer term. It is also related to the management philosophy of the business.

So we can say that Traders put money for a short term to earn. They buy and sell at a faster pace to hit higher profits in the market so they can trade even for twice, thrice or more times during the day to earn more. But missing the right time may lead to a huge loss. Intraday trading looks at the present performance and key news from the sector which can drive the companies to hit higher price and book profits in the short term. On the other hand, investing keeps people away from trends and expects them to invest in value. They invest for a longer time and patiently wait till the stock reaches its potential value. Ultimately, the ones who beat the market well and achieve their desired financial goals are winners!.

Its ultimately you who can decide whether trading the seeds at a higher price making a smaller profit in a short time is your goal or holding on and growing more seeds to sell at a much higher price, in the long run, is what youre looking for. It all depends on your risk appetite and decision-making abilities. Both of these pay well if you do it with proper advice. We are only the well-wishers who can guide you on this journey. In the current market, where volatility is at its peak one need to be very cautious while deciding upon the method and the adviser. We are here to help you out. So whenever you feel you need to get in touch with us to get more out of the markets, call us at 9637171436, because running out from the markets by sensing risk doesnt make any sense, ultimately stock market investing is the only tool where you can reap the highest returns. The legendary investment Guru Warren Buffett says, Risk comes from not knowing what you are doing, so be aware and be awake, lets invest in value to create wealth.

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ABOUT AUTHOR

Niveza Editorial Desk : We are a team of stock market nerds trying to stay ahead of the herd. We spend our grey cells everyday to a pave a smooth road for our clients in the shaky world of stock market. While tracking the mood swings of the market we bring our clients the most rewarding deals.

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