The Difference Between Investing and Trading
Investing and Trading are not the same thing. The returns you
seek, the length of time it takes to achieve those returns, the
amount of risk one is prepared to take, and the commitment one
can make to monitor the investments dictate the strategy of
whether to invest or trade.
Investing
Investing is holding an asset for a longer term, expecting it to
increase in value. The most common example is investing in
equity mutual funds through a retirement plan. Many of these
funds are held for years and are expected to show a substantial
appreciation over the long term.
You can also invest in individual stocks and hold them for 6 to
18 months or longer, sometimes much longer. This is referred to
as the "buy and hold" strategy.
Real estate would be another example of investing, unless the
property is purchased for quick flipping.
Jewelry, art, stamps, and collectibles are still other examples
of investing where they are kept for a long time in the hope
their value appreciates. Trading
Trading is also investing but the time frame for a return on
that investment is a much shorter period, usually a matter of a
few days or weeks.
The most obvious example would be day trading where a trader is
in and out of a market the same day.
Still other trading takes place over a period from a few days to
a few weeks.
Most trading takes place with individual stocks and commodities,
with commodity markets being the most predominant vehicle.