Investing vs. Trading: Which Path is Right for You?

There is a difference between short-term trading and long-term investing.

When you invest in a company, you hope to reap the profits of a company as it grows. This happens as that company builds wealth over a longer period. You are hoping the company will be worth a lot more in the future through ups and downs. The theory is that as company grows so will its overall value and in turn your investment in it. This involves time and patience, requires a buy and hold strategy because the company needs time to grow.

Trading involves short term buying and selling of a security. You are hoping to take advantage of the short-term gain. You focus on trending stocks. You prefer to get in and out of positions quickly if the trend changes. You are hoping to beat “buy and hold” strategy which is usually implemented with longer term investing. You are less concerned of the long-term prognosis of the company.

You can see how a great short-term trading opportunity maybe different than long-term investment opportunity.

Again, a trader can be selling while investor is buying, so you must have a plan before getting in.