Stock Market Trading vs Investing

investing-for-long-term

I have always asked few people, “Why don’t you invest in the stock market? You already saw me earning.” Yet quite a few shook their heads and some just nodded in agreement. Some said that monitoring the stock prices, buying and selling stocks are too complex. They’re missing the point.



I could let them read my posts on stock market introduction or things to consider in stock market investing but if they are not committed to learn, that would be futile.

Risk

We know for sure that stock market is a high-risk investment. Yes I strongly agree and I believe that impedes people to not invest. But risk could be reduced (even eliminated) with simple methods like I wrote in another post.

The Difference of Investing and Trading

In simple terms, investing is the use of resources to profit in the future. This may not be the definition on Webster or Wikipedia but I will expound it in layman's terms.

To invest is to outlay or spend something with the goal of earning more than what is spent. In stock market, it is buying stocks at a certain price and selling it after few years. Thus, it is a long term investment. Like a tree, you need to nurture your investments so you could reap the fruits when it is ready.



What is trading then? Stock market trading is a short deal of buying & selling stocks. To trade is to actively buy and sell stocks in a short period of time. Traders speculate in the stock market; they buy low-priced stocks with the anticipation that it would increase in value next week. Do you see the difference?

Conclusion

The goal is to become an investor, not a trader. Traders never win the game because they gamble. They speculate and then they lose. Whereas investors, they continuously build their portfolio by buying stocks and every month. In the end, investors will win the game.


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