Hey guys!
I often hear people use investing and trading interchangeably, but I know they’re not the same. Can someone explain the key differences between the two in terms of strategy, risk, time horizon, and returns?
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Investing-
Investing means buying stocks, mutual funds ETFs (a basket of many stocks and other assets), bonds, commodities, and more for long term(5-10 years or more) to make money over time.
Trading-
Trading involves in buying and selling of financial assets like individual stocks, ETFs (a basket of many stocks and other assets), bonds, commodities, and more for short term(daily or weekly) to generate quick profit.
Key difference between the investing and trading are-
- Time Horizon:
Investing is long-term, often for years, focusing on gradual wealth creation. Trading is short-term, aiming to profit from quick market movements. - Objective:
Investors seek to build wealth steadily over time, while traders aim for immediate gains from price fluctuations. - Risk Level:
Investing carries lower risk if diversified and held long-term. Trading is riskier due to market volatility and timing challenges.