INVESTING Vs TRADING

Hi readers, as I said in my previous article, I am writing this to get some lucidity b/w investing vs trading. May be, my view would be biased as I always believe in long-term returns. Just check the tagline of this blog. “An investment in knowledge pays the best interest”.

But for the sake of this article, I keep my belief aside. Is it really possible? Yes of course, keep on reading, you will come to know ✌︎.

Before we jump into balancing of these, just let me define these first. 

What is Investment? - In layman language “distributing what we had to get good appreciation as return”.

And Trading - “Net returns of buying and selling or exchange of goods and services”.

In stock market, most of us enters with an expectation of earning “Quick returns”, because of feedback from amateur proximate, YouTube babas, unwanted ads with unbelievable returns with screenshot proofs, and of course spam calls to earn high returns with the small investment amount. There are many more like this to get us into the stock market with myths.

But really thanks to Covid’19, almost 14.2 million demat accounts were opened during the Covid period (FY 21) and for our surprise, it is three times of previous FY’20 number. Indeed, it gave wide publicity of stock market to retail investors.

Read: Ideal No of stocks in your Portfolio

It is all because of free time provided by nationwide lockdown and searching for passive income sources. Most of us are exploring stock market as alternative income source. But we should take care of our principal amount first. Right?

When we first heard about Warren Buffett, RJ and other celebrity investors, what do we think ? just comment below ✍︎. 

My comments are: it is really great thing to imitate and good opportunity to earn from stock market like them.

But when I read about stock market, I came to know that it is not that easy as reading about it. Learning about is not enough to earn, we need to change ourselves in many aspects like consistency, patience, discipline etc., Because it took decades grow their money like that.

Nowadays, we are all doing simply imitate the strategies followed by the celebrities but why can’t we successful by copy these strategies. 

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Many of us are investing in stock market without much bother about fundamentals of a company. Then what do we expect to happen? obviously we lose our principle too. Perhaps, it may work for traders but not in investing. Traders depends on news things and they play with volatile market up 📈 and downs 📉.  

In short term, traders square off their positions in stock market to get net profit or loss. It is totally depends on risk taking capacity of an individual. 

There is myth in Stock market “ We need money for investing and the money can be earned from trading”. 

But If you are really in market, you should came across these quotes “Rome was not built in a day” and “Hiroshima / Nagasaki destroyed in a day”. What do you understand from these - “Earning takes time but losing does not”. 

Let’s see some comparison: 

Investing	Trading
Long Term and less risk	Short Term and more risk
Fundamental analysis required	No Fundamentals study required
Knowing about business and understanding required	Not at all
Certainty will be there	Probability. No certainty
Risk to Reward is low	Risk to Reward is high
90% of investors earning	90% of traders are losing
Dividend, Compounding factor do it’s work	No such thing
Passive income and we can be passive here	Passive income but we should be active
Spending less time on screen and more time on company analysis	Spending more time on screen and almost Nil time on company analysis

It is totally depends on your risk appetite and your way of approach towards stock market. 

In any of these (Investing | Trading), it is not about how much you earn but rather how much you lose. 

But one thing I want to remind you here - “Anywhere in Stock Market, Experts makes money by using their expertise but not by selling their expertise as advice”.

So choose your path wisely - INVESTING | TRADING 

All the best 👍. 

Comment here your choice of path 😁