Are you interested in trading or investing? Doesn’t matter right? They both are one and the same.

If you also think so then you are quite wrong. People often use them both synonymously but surprisingly they are distinct from each other. A person investing in the market for a long time can know the basic difference between this similar terms while the beginners often confuse them for one another. Sometimes, the experienced traders also find them using these terms incorrect after reading this article.

Once the biggest investor Warren Buffet said: “In the stock exchange, Small things make the big differences”.Some also might be of the thought that using a wrong abbreviation don’t make a big difference but for the progressive growth and setting up a strong foundation in the stock market, a buyer must be aware of every single technical term deeply.

If you want to know what are you actually doing either trading or investing or in which your interest lie then we will be discussed herein just minutes. Let’s find out!!

What is investing in stocks for beginners?

Let begin with the literal meaning of the “Investing”.Every one of us wants to multiply their savings as no one want to fulfill the opportunity cost of income earned in the form of interest earned, profit multiplied or dividend received.  In the case of the Stock market, Investing is what done by the people who want to invest there high earned income as an asset expecting some returns. The main or the sole purpose behind the investing is the building of wealth gradually through the buying of a portfolio of stocks, securities inclusive of bonds, funds, and other financial instruments and holding them over an extended period of time.

Investments are generally made for a long-term i.e, for more than a year. for a period of years, or even decades. Through this investors are rewarded with the enhancement of profit in the form of compounding (interest income),  or reinvestment i.e, reinvesting the principal amount while summing up the interest earned and stock splits along the way.

In comparison with the traders, investors are more curious regarding the market up and downs or trend reversals. In case of inevitable fluctuations, a typical investor will exit the market to maintain stop loss and profit with the expectation that the foundation of prices will eventually recover the losses. This shows the management of an investor over a period of time and makes it different than from the trading.

Stock Market Trading for Beginners

On the other hand, Trading involves purchase or sale of financial instruments, commodities, stocks or other such securities, with the main goal or purpose of expecting profitable returns that beat the buy-and-hold investment returns. TIme gap involved between the buying and selling of stocks is relatively shorter than the investment. Traders often employ technical analysis study for studying the different market trends or to conclude in advance the future profits or losses. The technical concept involves in trading for generating profits is through buying a particular stock at a lower price and selling it at a relatively higher price within a short period of time.

Difference between Investing & Trading

 

Basis

Investing

Trading

Time Period

 

Operates in a long run Operates in a relatively shorter term

Profit Earning

 Profits earned in the form of compounding interests and dividends   Trading profit is earned by the difference between purchase and sale price of stocks.

Risk Factor

Involves less amount of risk due to its operations in long run Relatively higher risk due to less time gap

 Returns

 Higher returns Can be lower or negative

 Tax

 Now Tax payable in capital gain . payable for short-term capital gains

Conclusion: End Result

Hence, if you use the word “Investment” in the near future then, it itself means investing your money for a long period. You must clear with your basics that either you are investing or trading. As this terms doesn’t matter for the beginners but contains a huge importance in long-term. Investment needs fundamental analysis for the perfection, stable earning or for the success of your portfolio while trading results can be fruitful only by having hands in technical analysis.

Basics works as the seeds which produce sweet fruits in the form of profit when practiced in long term. The cost of seeds doesn’t matter if the end result is fruitful. Similarly, if you are paying some minimal amount of fees for learning the basics to some professional or technical expert community like Royal Trading Lab then, it will surely bring profitable outcomes in the long run as you will become better from the thousands of traders or investors who are playing the game of blind trade. It’s our friendly suggestion that doesn’t hesitate to take professional help if necessary and especially when you are a newbie to this world web profit market, “Stock Market”.