A lot of people want to take charge of their own financial future, but they don’t know where to start. Should they invest, or should they trade? This is a question that investment expert Greg Lindae has tried to answer. It is important to understand the difference between the two, because they are not the same thing.
What Is Trading?
With trading, the goal is to make a quick gain by buying and then selling stocks, bonds, options, commodities, or other constructions for a profit. What those financial constructions do in the long term doesn’t really matter, as the aim is to make a profit as quickly as possible, usually within no more than a few days, but more often even a few hours.
What Is Investing?
Investing is about getting a long term gain from the value of a financial construction. You invest in the same things, like stocks, bonds, precious metals, and so on, but you hold them for a long time, waiting for them to increase in value. That capital appreciation is what you gain from.
Which Is Better?
A lot of people mainly want to know which of the two options is best for them – trading or investing. However, there is no easy answer for this. If you are just starting and your retirement is not yet around the corner, so you can take some risks, then investing is perhaps the better idea. However, you may not have enough money to purchase a worthy investment, which means that you might want to start with trading, until you have built up enough resources to invest.
What is even more important, however, is that you learn to understand the financial markets. Whether you trade or invest, you have to follow certain strategies that make it more likely for you to actually make a profit over time. This is where the real difficulty lies. Both trading and investing have their risks. With a trade, you could lose your money in an instant or, with an investment, you could find yourself having far less than you had anticipated once it is time to sell. Unfortunately, there are never any certainties in either trading or investing. Risks will always exist. However, there are a few things you can do to at least mitigate that risk if you understand both options.
Tips for Trading
- Look for ways to make a quick profit.
- Don’t focus too much on the value of the stock.
- Look at the pricing movement to determine profit or gain.
- Be prepared to win big, but to lose big as well – the risks are high!
- Stay on top of your trades.
- Know that you won’t get consistent results.
Tips for Investing
- Focus on long term profits.
- Consider how the value of a stock is likely to move over time.
- Be prepared to get consistent results, but for that to take a long time.
- You won’t need to be as active in terms of managing your portfolio.
- Start as early as possible, as it means the value can appreciate for longer.