195) Trader vs Investor

Short Term Trader vs Long Term Investor.

What is the difference between investing and trading?

Investing is the act of owning something (stocks, unit trust funds, property) that an investors thinks will have more value in the future. Investors will hold the investment to earn profit when the value increases and will take a more longer term approach. The timing is not so important.

Trading is the actual transaction that occurs when you buy or sell investments. Traders buy and sell the investments to take advantage of short term market swings. The buying and selling timing is very important.

Analogy Between a Trader and Investor

If you are given 100 good fruit seeds, which option will you take?
A) You sell them at a higher price. With the money, you buy more seeds and sells at a higher price.
B) You plant the seeds and grow the trees. The trees bear fruits and more seeds.You sell the fruits. With the money you buy more land to plant more trees.

If you choose A, then you are a Trader.
If you choose B, then you are an Investor. 

Are you a Trader or an Investor?

Trader looks at short term.
Investor looks at long term.

Trader trades the market.
Investor invests in the business.

Trader buys low, sells high for profits.
Investor buys the business for profits.

Trader buys and sells frequently. Makes smaller amount but more transactions.
Investor buys and holds. Makes bigger amount but fewer transactions.

Trader takes higher risk.
Investor takes lower risk. 

Trader uses timing.
Investor uses time.

Trader needs more skills.
Investor needs less skills.

Trader looks at profit and loss.
Investor looks at investment objectives.

Trader looks at price.
Investor looks at value.

Trader looks at market volatility.
Investor looks at risk levels.

Trader plays more active approach.
Investor plays more passive approach.

Trader uses leverage to multiply the profits.
Investor uses time to multiply the profits.

Trader uses Technical Price tools to understand the market.
Investor uses Business Fundamentals to understand the business.

Trader monitors the prices constantly.
Investor monitors the business occasionally.


Now you can better decide if you are:
a Trader or an Investor.