What is the difference between trading and investing?
Trading, speculation and investing may be similar in their respective basic concepts of using surplus funds or savings to earn a return but are different financial instruments though striving to profit through investors and traders. Market Trading, Investing and Financial market transactions are different, and they each follow different paths.
The difference between the two can be summarized as, investment is to use a certain amount of money to generate returns over a long period of time, while trading is generally to buy at a low price and sell at a high price. Make profits in less time. While investors may want to earn higher returns by buying and holding stocks and bonds over the long term, in addition to the potential to earn returns from stocks or interest, such as dividends, without having to sell stocks or bonds on the other hand , bonds allow traders to profit from the ups and downs of the market by buying and selling short-term, and making smaller but more frequent profits.
Trading and investing can be differentiated by 5 factors:
1. Time horizon: Investors invest their money over a relatively long period of time. Short-term market price fluctuations or fluctuations are not important to long-term investors, as opposed to traders who focus on the short-term most of the time. -Long term and continuous profit.
2. How to profit: Traders see the two-way movement of stock prices in the market, and traders can profit from the rise or fall of stocks or various asset prices. Investors, on the other hand, seek to accumulate income by doubling interest and profits within a few years by holding stocks and quality assets in the market.
3. Risk ratio: Both trading and investment involve capital risk, but trading has a relatively high risk ratio due to daily market fluctuations and short-term price rises and falls in exchange for higher returns. While investing takes some time to develop and involves less immediate risk and reward than trading, it can generate higher returns by accumulating interest and profits if held for the long term, as in the day-to-day markets.
4. Minimum Allocated Capital: This is the so-called initial account opening balance. Usually, more funds are allocated to investment than to transactions, so we can see that stock brokerage companies need $5,000 to start. need. In order to start trading or investing in stocks, forex brokerage companies need at least $200 to open an account.
5. Time Allotted to the Trading or Investment Process: We refer to the time a trader spends on following, analyzing and selecting trades. Unlike investing, trading requires more follow-up time, maybe not as long, but despite the lack of daily follow-up, it can often happen more than once in a day. A trader's time requires at least two hours a day. For long-term investing, it requires less time, maybe limited to a few hours a week or a month, maybe a few hours later, to research investments and identify suitable opportunities that fit within a given strategy. Follow the meeting minutes.