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Know The Difference Between Investment And Trading

Updated On Nov 29, 2021

Investing is the process of purchasing and holding a portfolio of stocks, baskets of stocks, mutual funds, bonds, and other investment instruments with the purpose of progressively building wealth over time.

Investments are frequently held for years, if not decades, to take advantage of benefits including interest, dividends, and stock splits. While markets will undoubtedly fluctuate, investors will "ride out" downtrends in the hope that prices will eventually rise and any losses would be recouped. Market fundamentals, such as price-to-earnings ratios and management projections, are usually more important to investors.

Buying and selling stocks, commodities, currency pairings, and other products on a regular basis is what trading entails. The goal is to outperform buy-and-hold investment in terms of returns. While investors may be satisfied with annual profits of 10% to 15%, traders may strive for a 10% return each month. Buying at a lower price and selling at a higher price within a short period of time generates trading profits. Trading profits can also be gained by selling at a higher price and buying to cover at a lower price to profit in falling markets.

What Is The Difference Between Investing And Trading?

Here are some of the basic differences between Investment And Trading

1. Differences In functions

A trading account is used to hold securities such as shares in an electronic format, whereas a trading account is used to buy and sell shares on the stock exchange.

You can use a trading account to trade stocks on the stock exchange.

2. Both Accounts Have A Different Nature

A trading account is similar to a savings account in that it allows you to make purchases with your money. Demat accounts allow investors to keep financial instruments in a dematerialized or electronic form that is charged and credited in the same way that savings accounts are charged and credited. A trading account, on the other hand, works similarly to a regular bank account. You must have both a demat and a trading account to trade in the stock market.

3. Measurement of Time

A trading account is a flow statement that reflects your trading transactions and is always measured whereas, because it holds your shares and other securities, a trading account is a flow statement that reflects your trading transactions and is always measured over time.

Investing, unlike trading, does not necessitate daily monitoring of your portfolio or the market. 

You may only need to check in on your account a couple of times a year once you've established your asset allocation and feel comfortable with your regular contributions. That said, you don't want to completely disregard your money. Setting a regular timetable for reassessing your portfolio can be beneficial.

Conclusion

Before you start trading, keep in mind that any short-term approach carries a significant risk of loss, and favourable returns are never guaranteed. It's also no secret that trading, particularly scalping and day trading, may be time intensive. Active trading necessitates a significant amount of time spent researching companies and stocks, as well as maintaining and managing a portfolio. A reasonable length of time and accumulating market experience are essential components of every trading technique. In the end, you may decide that you don't have the time to be a full-time trader.

You may also like to read - Safe Investments Options With High Returns In India

Everything You Need To Know About Income Tax Returns Filling In India 

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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