Broker Check

Are you a Trader or Investor?

March 01, 2023

Trading stocks and investing in stocks are two approaches when talking about the markets, and so it is important to understand the differences, and more importantly, in which camp do you fall under. 

Trading involves buying and selling frequently with the intention of making a profit from short-term fluctuations. Traders often use technical, fundamental analysis, and market trends to make decisions about when to enter and exit positions. Trading can be very risky as markets tend to be more volatile in the short term, than over a longer time horizon. 

On the other hand, investing in stocks involves buying and holding stocks for a longer period with the intention of making a profit from the growth of the company over time, either through its growth or its deliverance of cash flows back to the investor. Investing can be less risky than trading as long-term trends tend to be more stable, and investors can benefit from dividends and compound interest over time.

The main difference between trading and investing in stocks is the length of time for which you hold your positions and the approach you take to make your buying and selling decisions. 

Markets tend to push people in one camp or another, as during the good times, everyone seems to want to be a trader. But during the band times, it is hard to be an investor. This is a crucial area where a financial advisor can assist in your investment goals.