5 Key Differences Between Investing and Trading

Differences Between Investing and Trading

Are You A Trader Or An Investor? Savvy individuals realize the benefit that they can obtain from investing in the stock market, but they may not realize that there are two different ways to make money in this arena. A person may obtain gains off of the stock market by trading or by investing. What are some of the key differences between investing and trading?

#1 Investors Are In It for the Long-Haul

When it comes to trading and investing, one of the biggest differences is the time in the market. 

A trader is a person who is trying to make the most amount of money off of a jump in the stock market, and an investor is a person who is saving and waiting until the money grows over time. The majority of investors are holding onto their investments until they retire.

According to the experts at SoFi, stock investing can also be an important opportunity for young people to build wealth over time.

#2 Capital Gains

Both investors and traders are making money off of the increases that come from the stock market, but traders are making money off of a quick surge in a stock. 

A trader is watching the stock market and as the price of stocks goes higher, he or she will make the sell. Traders are allowing compounded interest and dividends to do their work, so they can benefit in future decades.

#3 Risk Tolerance

While investing is definitely a game of risk, there is definitely much more risk in trading and than there is in investing. A trader is diligently watching the market in order to know when will be the best time to quickly sell a stock and make a profit. 

See also  12 Ways to Improve Productivity at Your Workplace

This can be tricky, and a person could lose a lot if the timing is not right. On the other hand, an investor is leaving his or her money in an investment fund, so that the invested amount can ride out the market. Historically the stock market has always gone up.

#4 Skills

Generally, it takes some serious skill to trade different types of stocks, but anyone is able to invest. 

The majority of full-time jobs come with investment opportunities, and there are several different types of apps and websites where an average person can go and open up a simple investment account without much training.

#5 Financial Goals

Traders are generally interested in immediate and fast compensation. These are individuals who may get amazing benefits from their skills, but they also are possibly opening themselves up to huge losses if the timing is off. 

The trader might have the financial goal of getting rich quickly. When it comes to an investor, he or she is generally saving for a nest egg.

What Do You Want To Do?

Both traders and investors can have success when it comes to the stock market, but you do need to know what your financial goals are, and you do need to know how much you are willing to invest when it comes to time, money, and anxiety. The only person who knows what is going to be best for your financial future is you, so make a decision and start growing your money.