What is the Difference Between Trading and Investing?

What Is Trading?

What Does Investing Mean?

What Are the Differences Between Trading and Investing?

The differences between trading and investing are discussed below in the following table:

Aspects

Trading

Investing

Period of Investment

In trading, traders purchase stocks for a few seconds up to several months.

Here, investors maintain their investment for several years or even decades.

Risk Involved

A higher risk is involved in trading as traders attempt to gain from short-term market volatility.

In investing, the amount of risk involved is lesser since investors try to avoid taking decisions in short-term market volatility.

Effort Involved

To earn substantial returns, you must conduct detailed analysis and make efforts to track your investments.

Usually, less effort is involved in tracking the investments after investing.

Capital Growth

Keeping track of making successful strategies regularly for a long time may help you grow capital.

Investors aim to gain regular passive income through dividends and bonuses alongside long-term capital gains.

Type of Analysis

Technical analysis is performed in the case of trading.

Fundamental analysis is performed in the case of investing.

What Are the Types of Trading?

What Are the Types of Investing?

Trading or Investing - Which One Is Better?

FAQs About Trading Vs Investing

Who earns more investors or traders? up-arrow

Even though both earn substantial profits, traders periodically get comparatively more profit than investors if they take prudent decisions and the market condition is favourable.

What is the popular instrument of investment? up-arrow

Some popular investment instruments comprise stocks, bonds, mutual funds, exchange-traded funds, life insurance, and National Savings Certificate (NSC).

What do you mean by options in trading? up-arrow

An option is an agreement between two parties that gives the holder the right to purchase or sell securities during a predetermined period at a pre-set price.

What are the 3 Cs of investing? up-arrow

To become a successful investor, you should conform to the three C's of investing: 

  • Confidence
  • Character
  • Coachability.