Trading and investing may seem similar, but there are certain differences that you’ll need to be aware of. Both are available online nowadays thanks to the technological boom and you can get into them quite easily.
One thing they have in similar is that there are lots of platforms that can let you invest or trade in something. Some of these platforms will also teach you the basics of both if you’re looking to get into it.
When it comes to investing you’re working with exchange-traded funds or ETFs, individual stocks and more assets. You’re buying these assets to increase your profit. The thing that makes trading different from investing is that traders are inclined to sell unprofitable assets. Investors can stop investing in an asset if they think it is unsuccessful and then they’ll need to look for another one.
Investing can be as simple as saving money or any other online advice you might come across. You can save or accumulate money to invest in better transportation which can be helping a city improve its buses or metros or buying a better car for yourself. You can invest in education by helping school staff to better supplies and courses, or you can take yourself on a Spanish, Italian, programming or trading course to be a better member of the workforce.
Similar but Not the Same
When it comes to trading, you’ll need to understand the market thoroughly and know what the shifts in prices mean. You’ll need to notice these differences and react. Trading is a full-time job because it requires you to follow the shifts in the market due to internal or external reasons. If you don’t react accordingly then the assets in your portfolio will lose value and you won’t be able to make a profit.
So, trading is riskier than investing as you need to keep track of it and if you’re looking to become a trader, then you’ll need to accept this kind of risk. There are different kinds of trading too. Some of them are short-term trading sorts and others have an allotted time of day or night.
For example, you have day trading. These kinds of traders trade during the day and they might go for several hours or they split the day into different trading periods. If you’re into this kind of trading then you can find such platforms here and there, and everywhere online basically. But there are other kinds of trading that don’t take as long as a day or days.
Another example would be momentum trading where traders notice a change in price and they act immediately, selling or buying an asset. In general, trading is looking to make money based on certain shifts in the market that cause you to buy or sell assets. This is usually done for a short-term gain, whereas investments take a longer time to come to fruition.
But investments are mostly about profit as they come with compound interest. Certain trading assets will increase in value over time which is why certain traders keep such assets. Another difference is that you’ll need to check on trading assets frequently, sometimes even daily. Investments take months and years to come to fruition, and you don’t need to check up on them as often.
But investments can inevitably lead to failure. This means you’ll need to start again with the process of looking for the right investment. A current trend might sound good, but doing the research will tell you if it’s worth your while or not.
Keeping a diverse trading portfolio will help you get back your funds quicker as you’re able to make some quick moves and return the balance. But if you play your cards right investment will have you turn a profit.
As an example, you can take cryptocurrencies. They can be a good investment and a good trading asset if you play them right. When you research the market you’ll understand why they’re so popular even today and why people still invest money into them. Naturally, certain digital currencies have a bigger following than others, but you shouldn’t ignore a dark horse. Those cryptocurrencies on the low can rise and give you greater profit potential. If you’re looking to make a profit in a shorter period, then you can sell them as easily as you bought them, when their value rises. Alternatively, you can hold onto them until their value rises to your expectations and then transfer them into fiat money.
There are many differences and similarities between trading and investing. In general, one piece of advice that applies to them both is to commit to them if you’re looking to make a career of it. Enough time, research and knowledge will give you the benefits of both worlds.