Is trading better than investing?

#1
There are a few common points between trading and investing. Both involve putting your money in the stock market and waiting for the stock prices to rise. Speculation is also heavily involved in both activities. But which is better? Let’s go through a few of their features to get a conclusion:

Trading
  • Trading is buying and selling of shares in a really short period.
  • The traders can use margin to leverage their trades and earn better returns. However, leveraging is a double-edged sword and can multiply your losses as well.
  • Traders often trade in futures and options contracts. This is not available for the investors.
  • The trades can only be protected from losses through hedging.
  • Traders are more reliant on technical analysis indicators and the study of the price action.
  • Trading is done with the intention of earning on a short-term basis
  • Traders can use their profits from short-term trading profits to invest in long-term fundamental stocks.

Investing
  • Investing involves parking your money in an asset for a longer period of time. There are investors who are known to hold their investments for months to maximise their returns.
  • Use of margins is not available for long term investments.
  • Only through diversification, an investor will be able to minimise their losses and mitigate the risk factor.
  • If the stocks selected by the investors are the right ones, then the returns can be profitable.
  • Investors mostly rely on fundamental analysis.
  • Most investing is done to generate wealth to meet the long term goals of the investors.

As you can see, investing and trading are two sides of the same coin. And both of them have their pros and cons. Therefore, the choice would really depend on your knowledge of the market and what your financial objectives are.
 

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