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Difference between Trading and Investing July 31 2017Trading and Investing

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Difference between Trading and Investing

There are two ways by which you can earn money in the stock market either by Trading or Investing. People who are relatively new often tend to get confused and they mistake Trading as Investing. In reality, these are two different approaches to generate income form the stock market. Appropriate knowledge of the two helps you make a better choice, minimize risks and increase the profit earning prospects.

Let’s first look at the meaning of both the terms:

Meaning of Trading

Trading is all about buying and selling of shares in the market on daily basis. It is a way to earn quick profits by buying stocks and selling them off the same day or the day after. Traders always buy stocks at a lower price and sell them when the price shoots up. Stop-loss orders are used as safety measure by traders to protect them from incurring heavy losses.

Meaning of Investing

Investing means buying of stocks and holding on to them for a longer period of time. The investment can be for years or even decades. It is done with a purpose to earn rich dividends annually and reinvesting the earned profits into additional stocks of shares. The daily market upheaval does not make much of a difference to long term investors.

Difference between Trading and Investing

1.     Purpose – The purpose of both Trading and Investing is obviously to earn profit. But the key difference with Trading is that it is done to get an immediate return through daily buying and selling of stocks while the purpose of Investing is to build wealth through compounding interests and rich dividends in the long run.

 

2.     Period – More often than not, a trader sells his stocks the very same day he buys, the moment the price of the stocks increases. In some cases, he holds his buys for a day or maximum for a week.  An investor buys stocks and holds them for years or decades.

 

3.     Return – A trader can get a return of somewhere 10 to 15% a month while an Investor gets 10 to 15% annually.

 

4.     Risk – Compared to Investing, risks run high in Trading as it is aimed at earning higher profits at a short time. But setting a stop-loss order minimizes the risk of Trading to a great degree. Investing involves low risk. So the return is relatively low.

 

Also read: Importance of Setting Stop Losses

 

5.     Protection – A trader often protects his trading capital by setting stop-loss. When the unexpected happens and the market crashes, the stop-loss orders automatically sell the stocks at the pre-decided rates. Thus it saves traders from suffering a huge loss. Investors need to wait and watch in case of a crisis and expect the situation to improve so that the losses are recovered.

 

 

Conclusion

Having known the differences, you will want to make a choice for yourself whether you want to become a trader or an investor. At Indira Securities, we conduct short and intensive training programs for beginners on how to trade and invest. Our hands-on training and expert advice help you make wise trading and investing decisions. Open a Demat account with us to enjoy all-time quality services. 

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Prevent Unauthorized Transactions in your demat and trading account --> Update your Mobile Number/Email id with your Depository Participant and Stock Broker. Receive alerts on your Registered Mobile for all debit and other important transactions in your demat/trading account directly from CDSL and Stock Exchanges on the same day.........issued in the interest of investors...

1. Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020.

2. Update your Mobile Number & Email Id with your Stock Broker/ Depository Participant and receive OTP directly from Depository on your Email Id and/ or Mobile Number to create pledge.

3. Pay 20% upfront margin of the transaction value to trade in cash market segment.

4. Investors may please refer to the Exchange's Frequently Asked Questions (FAQs) issued by NSE vide. Circular No. NSE/INSP/45191 dated: July 31, 2020 and NSE/INSP/45534 and BSE vide Notice No. 20200731-7, dated: July 31, 2020 and 20200831- 45 dated: August 31, 2020 and dated: August 31, 2020 and other guidelines issued from time to time in this regard.

5. Check your Securities/ MF/ Bonds in the Consolidated Account Statement issued by NSDL/ CDSL every month.

"As per the directives of CDSL and esteemed Exchanges, it has been made mandatory for every client to furnish their latest KYC details viz. Valid Mobile No., Email- Id & Income range on or before 31.05.2021 else your Account will be marked as Non Compliant and will be Freezed till the compliance of such requirement."
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INDIRA SECURITIES PVT.LTD. (SEBI REG.NO.):NSE TMID: 12866, BSE TMID: 663, CDSL DPID: 17000 SEBI REG. NO.: INZ000188930, MCX TM ID: 56470, NCDEX TM ID: 01277, CDSL REG. NO.: IN-DP-90-2015

DISCLAIMER:

"INVESTMENT IN SECURITIES MARKET ARE SUBJECT TO MARKET RISKS, READ ALL THE RELATED DOCUMENTS CAREFULLY BEFORE INVESTING."

INVESTORS GRIEVANCE

Jyoti Singh. Email: compliance@indiratrade.com. Call : 0731-4797275