Differentiate between investing and trading.

The major differences between investing and trading are as follows −

Investing

• Creates wealth over a long period of time.

• Buying and holding.

• Market fluctuations has no effect.

• Add on benefits − bonus, dividends etc.

• Fundamental indicators are EPS, price to earnings, current ratio etc.

• Long term period.

• Creates wealth by compound interest and dividends.

• Low risk.

• Industry, economics, financials, competitors etc. will be affected.

• Very few brokerage charges.

• Makes sound investments.

Trading

• Generates profit frequently.

• Buying and selling of stocks.

• Daily market fluctuations will effect.

• No add on benefits.

• Technical indicators: moving averages, stochastic oscillators etc.

• Short term period.

• High risk.

• Psychology of market, money management, risk rewards etc. will be affected.

• Have brokerage charges.

• Requires active environment.