Trading Versus Investing
Now it is time for a brief review of the difference between trading and investing. There are many different types of trader, including day traders, swing traders, and short term trading. Opinions vary on the exact definitions of these, but they all measure the time they are in the market in terms of seconds, minutes, hours, days, and at the most, a few weeks or months. Traders are looking to make their profit in a relatively short period of time, and certainly not as much as a year.
People are getting much more interested in trading as the world gets more impatient. Waiting for years to see a decent return on your money invested is like watching paint dry for some people, and the turmoil in the markets in recent years has meant that many people don’t even have faith that their money will grow slowly if they leave it alone. Trading involves taking an active interest so that you use your resources wisely.
On the other hand, investors are generally in it for the long-haul. The phrase most closely associated with investing is ‘buy-and-hold’. This reflects the much longer time horizon which most investors have. Typically the outlook may be ‘investing for retirement’.
Again, recent events have made many people question this philosophy. The steady growth of previous decades of investments just can’t be taken for granted any more. Investing can work – for instance Warren Buffett seems to be quite good at it – but it seems much more risky than it used to, and if you are being forced to take risk by the markets then you may as well be trading your money and potentially making bigger gains.
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