Most people believe that trading and investment both are the genres of equity trading. On the contrary, there is a huge line that differentiates these two. Undoubtedly both investment and trading are money-making techniques but you cannot say that these two are similar. So to clear out the air and make you realise what trading and investment are, in this article we will include some of the major differences between these two. However, before we directly jump on the topic it is really important to know difference between trading and investment.
What Is Trading:
Trading is the capital earning technique where you use frequent and short term transactions. This technique involves strategies for buying and selling stocks. Here you have to constantly monitor your trade and take actions like hold, buy and sell depending upon the market sentiments. In trading, you can earn profit within a few minutes, in a single day or even by holding your trade. Also, trading involves a high amount of risk as compared to investment. One has to keep in touch with various trade-related news and actions to work on the earning technique. Other than the usual stocks, trading in cryptocurrency has also become very much popular. This type of reading involves lesser risk. Trading is all about buying the trade at a lower price and selling the same when the price goes higher.
What Is Investment:
Unlike trading, investment is a long-term technique. For wealth creation here you have to wait longer than trading. The core purpose of investment is to gain gradual profit. This technique uses instruments like stocks, mutual funds, bonds, baskets of stocks and more. When it comes to investing, you may have to wait for years and even for decades to get the desired profit. In this technique, investors earn profit by giving time to the money, compounding, dividends and reinvesting. With these methods, investors increase the wealth and generate maximum profit.
For example, you and your friend brought seed for each. What your friend did is, he buried the seed in the soil, watered it, took care of it and then ate the fruit of the tree. On the other hand, what you did is instead of barring the seed you sold it to someone else and got the profit instantly. The technique of your friend was long term and yours is short term. Similarly, the profit gain by the two of you is also different. This example will instantly explain to you the core difference between trading and investment.
Difference Between Trading and Investment:
As trading depends upon frequently changing trends, the amount of risk it carries automatically increases. On the contrary, investment is a long term process and as the time horizon increases the risk decreases with it.
Trading is a technique where you just need a few minutes, a day or a week to gain profit. However, when it comes to investment it is a long term process, where an investor has to wait for years or even for decades to make a good profit.
If you are the one who is ready to take the risk and you want fast profit then you can certainly go with the trade. On the contrary, if you don’t want to take risks and you can wait longer to let you let your capital grow, investment is certainly the best option for you. Usually, an investor earns a profit of 15 to 10% annually however, a trader can generate a gain of 15% or more in a month.
In investment, you just have to put your money in mutual funds, bonds or even in stock and wait for the same to grow. However, with trading, you consistently have to monitor your trade. One also has to keep in touch with the news related to the trading instrument and develop strategies to make a higher profit.
Decision making is important in every strategy. How you react to the current situation and how to change your strategy depending upon the circumstance is vital in Trading. Whereas in investment, you just have to make a strategy and stick to the same till you finish your investment period.
These differences will make one thing clear among a few that if you want to earn huge money and are ready to take the rest trading is the best opportunity to earn good capital. In trading, Bitcoin is the most popular instrument. If you are willing to invest in Bitcoin then all you have to do is get yourself registered with the Bitcoin Loophole. It is an automated, highly advanced and secure software for trading in cryptocurrency. The traders can enjoy fast and smooth trading with this award-winning software. So, download it now and give a kick start to your trading game.