InvestorQ : How is trading different from investing
Mitali Bhutta made post

How is trading different from investing

Answer
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Abhi Yadav answered.
2 years ago


Investing and trading are two very different methods of attempting to profit in the financial markets. The goal of investing, being long-term, is to gradually build wealth over an extended period of time. You just do buy and holding a portfolio of stocks, baskets of stocks, mutual funds, bonds, and other investment instruments. Investors often enhance their profits through compounding or reinvesting any profits and dividends into additional shares of stock. Investments are often held for a period of years, or even decades (like Warren Buffett does), taking advantage of dividends and stock splits along the way. Stock splits do not add value but they make the price lower and hence more attractive. While markets inevitably fluctuate, investors will "ride out" the downtrends with the expectation that prices will rebind. Any losses will eventually be recovered. Investors are typically more concerned with market realities or fundamentals, such as price/earnings ratios and management forecasts.