Life lessons pave the way to a greater understanding of investing and trading
Although most of us do not even realize it we have actually been trading and investing since an early age. Do you remember trading an item with a friend for a better or more valuable one? And saving a penny or two for that thing you really wanted?
Investing and trading are things we have all learned from an early age
As young adults, we come into a world where our pocket money is now our salary only it has to start covering a lot more than our pocket money did. Some of us learned from an early age that if we saved half of our money on a weekly/monthly basis we may not have been able to buy everything we wanted then and there but in a few months’ time we would have more than enough to buy something better or had a nest egg for that rainy day! We were already programming ourselves to invest in our futures!
As is the case with trading be it baseball cards for other baseball cards sometimes we would have to trade two or three less common ones for the star piece but once again that start piece could go on to fetch even a bigger price at a later date when the item became even more valuable.
The difference between investing and trading
Although they both can become lucrative tools in the creating of wealth they are two different approaches to getting there even though they both have similar risks and rewards.
#1 Investing is a method whereby investors invest their capital for a long-term period and short-term market fluctuations have no immediate effect on their investment.
Trading is a method whereby the trader will hold stocks for a shorter period, like a week, day or even a month depending on the activity of the stock.
#2 Investors create wealth by compounding interest over a longer period of time.
Traders buy and sell stock on the fluctuation of the market.
#3 Investing does come with its share of risk, but it is a much lower one than that of trading as is runs on a longer period of time. Whilst trading involves higher returns over a shorter period of time where the price can drop at any given moment.
#4 Investing is a slower process whereby the investor will keep watch on the stock being held waiting for them to reach their full potential and tend to keep away from the trending markets leaning more towards the ones with potential value.
Traders, however, do faster buy and sell of stocks to get the higher profits but this also means that making a move on the stock at the wrong moment could lead to potential losses!
Both investing, and trading has risks and rewards it is an individual choice as to which one best suits their needs.