What's the difference between trading and investing?
By Vivek Banka

Across the globe, investors often presume that investing and trading are the same. However, nothing can be further away from the truth regarding the differences between these two terminologies.

Investing is an activity that involves the management of your assets in a manner that helps you take care of all your financial goals in a manner that is efficient and effective

On the other hand, Stock Trading involves indulging in acts of buying and selling to take advantage of short-term movements.

The one big aspect that differentiates these two activities is the time horizon. While trading can take less than a few minutes, investing is generally a much longer activity.

Trading is something only experts and veterans of the stock markets should indulge in as it is fraught with multiple risks to both one’s capital and is also time-consuming while on the other hand, investing is a more passive activity which requires deep research before one starts, however post which it requires passive monitoring and actions only if triggered.

Investing is a task that is something every individual needs to do irrespective of their skill, stature, income level or anything else, while trading is something that is a vocational thing and done by people either skilled in a certain field or activity.

Trading, especially in stock markets, is an absolutely avoidable activity. This fact is also vindicated by the latest SEBI report and its findings on individual traders, especially on the future and options side. Any good financial planner / financial planning exercise should avoid trading as a suggestion or option completely.

One simple way of checking which is a better activity is to see around us –  Most of the greats of the stock markets are people who have made money and wealth through investing; we hardly come across well-known traders who have lasted more than a few market cycles – the house eventually wins and which is why trading in stock markets is an activity best avoided.

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