Are you looking to enter the share market and grow wealth by investing in promising stocks? Of course, everyone will say yes. But wait! When we say invest, what do we mean by that? And then, on the other hand, you also have something called trading! So, what do both these terms mean?
Many people who consider both these terms the same, use them interchangeably. However, that’s not the case. Trading and investing are two approaches to wealth multiplication in the stock market. As an aspirant looking to undergo share market training, you should understand the difference between the both. So, let’s look at some key ones in this blog.
What is Trading?
Simply put, trading is the frequent buying and selling of financial assets like stocks, bonds, commodities, etc., to make short-term gains or profits. Trading requires you to keep track of your investments actively, identify potential gain opportunities, and buy or sell your stocks to earn profits from them.
Some types of trading strategies include the following.
- Day Trading: It involves opening and closing positions within the same trading day. Traders capitalize on intraday price movements.
- Momentum Trading: In this type of trading, traders focus on stocks with a noteworthy price momentum.
- Swing Trading: Traders hold stocks for a few days to weeks to gain from short to medium-term price shifts.
- Scalping: This strategy focuses on making small and quick profits from minor price changes and shifts.
What is Investing?
On the other hand, investment also involves buying a stock, mutual fund, etc., to benefit from the asset’s long-term growth. Many people invest in stocks to fulfill their financial vision and achieve long-term goals like buying a home, children’s education or marriage, building retirement funds, etc. Investing also has a few strategies like trading, including the following.
- Value Investing: Investors look for stocks undervalued based on fundamental analysis.
- Growth Investing: In this type of strategy, investors look for stocks with solid growth potential from the revenue and earning point of view.
- Dividend Investing: Investors invest in stocks with regular dividend payouts.
- Income Investing: This one focuses on earning regular income from investments.
Both these are approaches with features, making them unique. Let’s look at some of the most significant differences between stock market trading and investing.
Difference Between Trading and Investing in the Stock Market – Explained!
Here’s what makes trading and investing in the stock market different from each other across various parameters.
| Aspect | Trading | Investment |
|---|---|---|
| Objective | Benefit from short-term ups and downs of the stock market by identifying the right opportunities to buy, sell and trade. | Build long-term wealth by investing in stable companies or investment options like mutual funds, bonds, etc. |
| Investment Timeframe | The investment time frame is usually short and lasts for weeks, days or even a few minutes. | The investment time horizon is wide as the objective is to build long-term wealth. |
| Transaction Frequency | The frequency of transactions is high. Traders buy and sell stocks very frequently as they look to capitalize on short-term gain opportunities. | The frequency of transactions is low. Investors buy and hold shares for a long time. However, depending on the market situation, they may buy and sell the shares to keep their capital secure. |
| Research | Traders should perform technical analysis, market trends, updates and news. | The focus is on conducting fundamental analysis, the company’s long-term financial wealth, market performance, offerings and also the overall industry situation. |
| Risk Involved | High- market ups and downs can significantly affect returns. | Low – Investors invest in the long run. Thus, short term ups and downs may not affect the stock value and returns as much. |
| Emotional Skills | Solid control over factors like greed and emotional decision-making. | Skills like patience and vision matter. |
Remember, both approaches are amazing in their own right. In-fact, everyone should have both a trading and investing portfolio. Whether you trade or invest, depends upon your investment goals. Hence, you should review your needs before you adopt a particular approach. You may also work with a mix of both approaches to benefit from short-term and long-term gains.
Want to build the skills to earn profits from the share market, whether trading or investing, or both? Join Wealth Note’s share trading classes and enter the share market confidently. We are one of the most preferred institutes for searches like trading classes near me due to our comprehensive course, personalized training, and practical exposure. Call us at +91 70666 66464 to learn more about stock market courses in Pune.