What is stock trading and stock investing? Would you prefer to trade stocks online or to invest in the stock market? In a broad financial term, there is a big difference between stock trading and stock investing.
This post is just another topic about Stock Market Today. Before we continue this topic, a reader of InvestmentTotal.com sent me an email and asked me a simple question regarding wealth accumulation when he read my article about why rich getting richer and poor getting poorer. I will answer the question with the best I possibly can. Don’t forget to ask the stock experts if you are planning to invest in the stock market.
Okay, let’s begin. “Your blog [InvestmentTotal.com] is very useful and informative, I am so glad I have read your article about why rich getting richer and poor getting poorer, and your article about financial freedom, it makes me think deeply about my financial future and one of my plan is to invest in the stock market in our country. I already bought my insurance and build a cash reserve based on what you’ve written. I have extra cash to invest. I have read in other website that stock traders can get rich faster than investor who waits longer, what can you say about it?” – James B. from Colorado, USA (I have no permission to put his complete name)
I just replied, “you said you want to invest not to trade. In trading you must have a special and extra ordinary expertise and skills in the stock market. In trading you can become a millionaire fast or become poorer than a rat. Maybe you just read an investment offers or a discussion that promotes stock trading ebook that’s why your mind will sometimes think trading is better than investing. Forget trading, focus on investing.”
Stock Trading and Stock Investing
According to the dictionary a word trading means “buy and sell as a business, to make an exchange with someone, a trader is a person engaged in commerce” while the word investing means “to put money to a use expected to yield a profit or income”.
Reference: The New Lexicon Webster’s Encyclopedic Dictionary of the English Language, Deluxe Edition, Lexicon Publications, Inc 1992, page 508
Take note, the two are in the field of investments because they use money and they are both expecting profits, agree?
It simply means trading stocks can only be done within a minute to an hour because it only consist simple activities such as buying and selling stocks. Stock trader can make or lose invested capital in a matter of few minutes while investing will take longer from few months to many years and the investor has also the possibilities to lose his invested capital. When it comes to risk, they are both risky. The one who trade makes his investing risky too high (money capital) and too low (time invested), while the one who invest for long term makes his investment too risky because of the longer period of years his money is stay invested.
Situation: John will trade $100 today, he won. He trade $200 tomorrow, he loosed money. But do you think will John do? Of course, he will trade $400 just to keep on winning and cover his losses. But John, learn how to become stock trading expert. John is making an astonishing $1,000 per day. After few months, he loose more than half million dollars without knowing it because he is just addicted to trading. Would you also trade stocks?
Peter is an stock investor, he is just an average wage earner. He keep on investing $100 every month within 20 years. After 20 years because of consistent investing, his $100 per month is now $500,000 use for his retirement. Isn’t it great to retire that has enough money to enjoy your retirement years?
Stock Trading and Stock Investing are Both Good or Bad
If you will trade stocks you will only lose money, that’s what other investor says. But for traders, stock trading can also help them to make a good living. Some investor says invest for long term, use dollar cost average and have a bright future. It is true that investing is one of the best way to have a good financial future. But why some people trade not invest?
Should you trade stocks like John? It depends in your skills and knowledge and of course you have to consider your risk appetite. Actually trading in the stock market is another form of g*Mbl!Ng. Bet on your stocks and hoping to win in just a minutes. Unfortunately when you win, you will get addicted, you keep on trading and when you lose money you still keep on trading because you want to cover your losses.
Until you get addicted to trading, but when you have no money to trade, you will do whatever just to do yourself a good favor. Just ask yourself! Is that what you want to your life and finances?
While investor such as Warren Buffett: Chief Executive Officer of Berkshire Hathaway, he keep on investing that’s why he is one of the highest net worth individuals on the entire planet earth. Stock investors are mostly succeeded than stock trader. That’s why my advice to the reader is to forget trading and focus on investing.
So, how to start investing in stocks today? Simple. Open a stock broker account, fund your account, buy a stock preferably stock of a stable company (blue chip stocks). Invest for long term, do it in a regular basis such as every month or every quarter with a small amount or big amount if you can afford. Sell your stocks after 20 years.
Stock Trading and Stock Investing to Your Advantage
If I am not mistaken, Mr .Warren Buffett (a successful investor) buy and hold a stock for more than 45 years. Stock investing is not a get rich quick scheme, it is a slowly but surely getting rich scheme.
Do you want to get rich quick but your riches are also disappearing quickly or get rich slowly and stay rich. You can use stock trading and stock investing to your advantage.