We often hear the terms investing and trading a lot within a business. While you know that they have something to do with finances, you might not know any deeper than that.
If you’re looking to bring in more of an income, whether it be alongside your usual income, or it be your only source, then you need to know what they mean, as well as the difference between them. They are both rather similar in terms of how they go about making money through financial markets, but the method that they go about it is very different.
Here’s what you need to know.
When investing, the aim of the game is to gradually accumulate a lot of wealth over a long period of time by buying and keeping hold of mutual funds, portfolio of stocks, bonds, baskets of stocks, and more. Being an investor, you would usually enhance your profits by reinvesting more profit into the stock that you already hold. This process can go on for a few years, or even longer – up to decades, because this allows you to take advantage of things like interest rates, and dividends. Markets are prone to rising and falling – that is part of the risk that comes with it, but as an investor, you learn how to ride it out with the expectation that prices will soon rise again so any losses will soon be recovered. Or of course, so you hope.
Trading moves a lot quicker than investing, meaning there are more frequent buying and selling of stock, currency pairs, commodities, and more. The overall goal is to create returns that will be higher than any form of buying and holding that investors do. For example, investors may be very happy with a ten to fifteen percent annual return, while traders might be expecting to gain ten percent every month. The profits work by sourcing as much information through services like Stockstotrade and then buying at a low price, and selling it off again at a higher one, all within a very short space of time. Investors try and avoid risk at all costs, whereas a trader understands that they will take a lot of hits, as well as a lot of misses very regularly, and yet they just keep moving. A lot of the time you will hear people talking about a trader’s style. This refers to the space of time that one has been holding for until the stocks have been bought and sold again.
As you can see, investors and traders both go at it a completely different way, but essentially each individual’s end goal is to create a profit off whatever they are buying and selling. Before you get yourself into one of these business ventures, you need to make sure that you know as much as you can first to avoid risking it all and not being able to get any of it back. Investors take time and are more meticulous, while traders are fast paced risk-takers that can pay off big.