Investment and trading are the main tools of fortune making in the equity market. However, these two methods are completely different in the way they generate profit in the commercial market. The two approaches can be compared to two people buying seeds to sow. Person A decides to sell the seeds because the market is favourable and subsequently makes a profit. Person B, however, decides to sow the seeds and water them until they yield fruits. Person B makes a profit from the yield, while person A gets his or her profit from selling the seeds at a higher price.
In summary, person B made a lot of profit, but the process took some time, this is an investor. Person A made less profit in comparison, but took less time, this is a trader. This analogy best describes the main difference between trading and investing. Here are some more elements that differentiate the two:
Every business has a risk factor attached to it. Undeniably, both investing and trading puts your money at some risk. However, trading tends to attract both higher risk and higher return within a very short time. Investing involves some element of skill, as it must be developed over a longer period to show a return. In the short run, it attracts lower profits and risk, but in the long run, it can offer a massive return.
Capital Growth and Return
Traders are only interested in the movement of investment product in the trading market. They don’t care who owns the stocks or CDs, all they are looking for is an opportunity to enter the trade and exit with a profit. Investors have to sit down and look beyond how the investment products are performing today. After carefully analysing everything, they invest in a product on a long-term basis, attracting both dividends and compounded interest.