Everyone in this world wants to earn money and be rich at some point of time.

Everyone in this world wants to earn money and be rich at some point of time.

Right! It is important to note that to be rich we need to make our money work for us.

For that some take up investing in various asset classes and some go for trading in the equity markets to generate returns on a regular basis.

Though both generate income, people often confuse stock trading with stock investing.

So in this video we will ensure to remove this confusion between trading and investing in the stock markets.

We will discuss five major points of difference here.

First, w.r.t the objective – a traders objective is actively selling and buying shares to generate returns on a daily, weekly or monthly basis. Whereas, an Investors objective is to accumulate wealth by holding the investments (shares) for a longer duration.

Second, w.r.t. duration or time period, Trading is all about buying and selling shares in a short duration. Whereas Investing is about holding a stock for long term (generally 3 to 5 years or even more) in order to create wealth in the long run.

Third, w.r.t. market fluctuations, A trader will look for short term fluctuations in price movements in order to make a profit from it. On the other hand, an investor is not bothered about short-term market fluctuations.

Fourth, w.r.t entry exit points, Traders mark the exit and the entry points in market to take maximum advantage of those points. While, an investor do not time the market. They are concerned for the long term future prospects of the company which will lead to capital appreciation.

Fifth difference, w.r.t. risk, Trading involves a high degree of risk as it includes actively buying and selling. Small mistakes often magnify the outcomes. Investing on the other hand creates wealth over a period of time reducing but not eliminating the entire risk factor.

So till, here, you must have come to know how trading a short-term event whereas investment is a long-term event.

To sum up we can say that trading is about timing the market with short-term trading strategies and use various technical tools to profit from small price movements in liquid, or heavily-traded, currencies or stocks.. It is normally done in order to generate short term gains. For example, Rakesh Jhunjhunwala was initially a trader who actually created his capital by trading in the stock market. Now he uses this capital to invest in stocks. He stills trades whenever he finds any kind of opportunities in the market to grab a profit from it but he also keeps on searching for good companies with good fundamentals for his long term wealth creation. We all know Warren Buffet who created his entire wealth through investing over a long period of time. So by these differences we understand that, trading is helpful in generating short term returns but investing helps one to create wealth on a long term horizon by staying invested in it after being thoroughly clear on the fundamentals of the company.

Thank you for watching the video!