//Investing Vs Trading : What you should do!

Investing Vs Trading : What you should do!

When it comes to wealth creation in the equity market, investing and trading are the two genres of the field. However, investing and trading are very different approaches to wealth creation or generating profits in the financial market.

In investing, you gradually build wealth, by creating and maintaining a portfolio (stocks, bonds, mutual funds etc.), while in trading you frequently buy and sell stocks, commodities, currency pairs or other instruments, to outperform ‘buy-and-hold investing’. Advantages can be found in both ways of growing your money, as they both have a unique role. But if it comes to Forex Market, then trading is the only way to earn profit in short period. As trading is the way to go due to the unique aspects of the market.  For example, Assume that trading is a one-day cricket match while investing is test cricket. You can see skilful players in the team who are expected to strike fours and sixes to score higher in a one day match. Similarly, traders are skilled, technical individuals who time the market and learn market trends to hit higher profits in a specific time. It is related to the psychology of the market. Investors, on the other hand, analyze the stocks they want to invest in. Trading is a method of holding stocks for a short period of time. It could be for a week or more often a day! The trader holds stocks till the short term high performance, whereas, investing is an approach that works on buy and hold principle. Investors invest their money for some years, decades or for an even longer period. Short-term market fluctuations are insignificant in the long-running investing approach.

Advantages of Investing :

  1. Takes a long time to earn more profit
  2. Uses the power of compounding.
  3. Tax paid is less.
  4. The benefit can be the dividend.
  5. Less day to day monitoring involved.
  6. Adopted by mutual funds.


Advantages of trading :

  1. Power of leverage to multiply wealth.
  2. Short-term so usually one can avoid overnight holding risk.
  3. One can short sell first and make money by buying at the bottom.
  4. Hedge funds adopt these frequently.
  5. Lesser capital required.


Both investors and traders seek profits through market participation. In general, investors seek larger returns over an extended period by buying and holding. Traders, by contrast, take advantage of both rising and falling markets to enter and exit positions over a shorter timeframe and earn profit frequently.