#Investing vs Trading? What is the difference..

Updated: Mar 28

We all have seen movies like "the Wolf of Wall Street" or "The Big Short" that are based on the glamorous life of Wall Street and the extremely wealthy Fund Managers...

but what really is the difference between Investing and Trading?!

The key difference between the two is with Investing it’s a long term strategy where you are buying shares in a company that you believe will create good profits and a return on your investment in the form of Dividends.

A lot of investors bet on the Market so they buy an index fund like the S&P 500 which is made up of the top 500 companies in America. The key to investing is you should always diversify your asset class portfolio and also different industries and aim to invest long term or at least 3-5 years ideally longer to get the benefit of compound interest and divided reinvestment.

Trading is more so for the professionals who are far more risk adverse. Day trading is buying and selling of stocks, bonds and options in a market with the goal of short term gains. This can be very risky and is seen in a similar way to gambling so as some would advise it might be better to book a trip to Vegas, at least you get free drinks there!

Trading should really be left to professional’s or anyone who has the time to research and analyse a companies year end financial statements and go through as much as they possibly can to determine if the business has potential and what its P&L balance looks like to determine if it is worth the risk in returns.

You should really seek financial advice if you are thinking of investing and talk to a professional as everyone's financial situation is different.

Most importantly before any individual thinks about investing they should ideally have an emergency fund put aside and be willing to accept any risk with their capital.



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