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Investing vs. Trading

SharewiseNews_EN 
0 0 28.07.17
Investing vs. Trading
 


What is the difference between investing and trading?

Investing

Investing is for the long term. You are buying stocks to exploit the long-term growth rates generally available in equities. With the exception of occasional bear markets like the one seen in 2007-09, that growth rate has consistently beaten bonds, cash or other mainstream investments. Through research and fundamental analysis one tries to create a balanced portfolio of different stocks.

Some sorts of portfolios are:
 

Index Tracker portfolios

Set up to mirror the Dow Jones or SP 500 index, they will be constructed to exactly follow movements in those indices.
 

High Dividend Portfolios

Made up of stocks with above average dividend yields.
 

Blue Chip investment portfolios

Not limited as strictly as the tracker portfolios, but comprising only the largest and top rated stocks. Generally strategies will either be focused on maximizing income or long term capital growth.

 

Trading

Trading is a more active, short-term strategy. Buying and selling frequently to take profits rather than accumulate long term growth.

Some sorts of traders are:
 

Day Traders

They look to buy a stock at the low point of the day (or sell at the high) and close that position for a profit the same day. They aim to have no open positions overnight.
 

Scalpers

Make dozens of trades every day and try to make a very small profit on each. They will also close the position quickly if it goes the wrong way, to limit losses.
 

Momentum Traders

Look for a situation where there is high volume in a stock that is moving decisively one way or the other and trade in line with that trend. They will watch for that momentum to ease and then take profits.
 

Fundamental, or swing Traders

Look at a company's fundamentals and will hold positions longer than the traders above, but are still looking for short to medium term profits and buy and sell actively in the market.
 


Want to try some of this out?

You can practice both investing and trading on sharewise. You can check out other people's stock picks, or share some of your own trades.

 

 

 

 

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