Stock Trading And Stock Investing


Some of us use the terms stock ‘investing’ and stock ‘trading’ interchangeably. Trading also requires investment. But if you look closely, the two terms ‘ trading’ and ‘investing’ will appear in different lights and with different connotations.

While trading is a quick and transient process, ‘investing’ implies a long-term process that involves patience and perseverance. We more often use the phrase real estate investment rather than real estate trading, because real estate implies ‘buying and holding’ the estate for some appreciable span of time. Real estate cannot be traded like shares in day trading. Similarly we do not say ‘day investing’. We say day trading. Trading involves buying and selling within a short span of time. The element of wait is inherent in investment. You invest in the education of your children. We have many more Stock Market Investing Articles Now Available.

Though stock trading appears to be an alluring option for making quick money, most people fail to achieve their objective of becoming rich in short time. Rather than making money such people end up with losses.

It must, however, be noted that the reasons for failure to make money do not lie in the nature of stock trading itself. They lie with the traders. Stock trading, or, for that matter day trading is a full time business. It is not gambling. Stock trading is a very unpredictable business. If it could be predicted by rules, everybody would follow them and become rich. Of course, there are some basic rules, which must be learned and followed to start trading stock. But ultimately it is like the game of cricket. The players do not know which side, at which angle or at what speed or height the ball will come. The successful cricketers develop intuition to deal with the approaching cricket ball.

As in case of any other business or game, you need to learn the ins and outs of stock trading. Stock trading needs investment of time and money to gain knowledge, skills and experience. These intellectual assets cannot be acquired over night. These virtues are necessary to evolve a quick and strategic intuition to deal with the sudden developments like the rises or falls in share prices, It must be noted that intuition comes in where the rules fail to work.

In order to be a successful stock trader, you need to have a killer instinct and an eye of a hawk. You need to be disciplined and resourceful. You need to learn to anticipate the trends and think ahead of time. Stock trading cannot be done on borrowed knowledge or tips and tricks of the experts, gurus and pundits. You need to develop your very own skills and responses to emergent trading situations.

Stock investing

As said earlier, stock investing implies long-term process. You have specific goals to achieve. While the traders try to ‘time’ the market by buying the stocks when they think the market has reached its lowest or selling them when it has peaked, the stock investors are usually not moved by such fluctuations. It must also be noted that since the market fluctuations are unpredictable, quite a lot of traders suffer losses. Billions of dollars are lost every year by the market’ timers’ who get the things done the wrong way.

Stock investors, on the other hand, wait patiently for weeks, months and sometimes even years to achieve their goals. It has been observed in a study on the performance of the Standard & Poor’s 500 between 1926 and 1987 that the S&P 500 returned, on average, about 9.44% during the 62 years from 1926 through the end of 1987. It was, therefore, established that “the overall direction of the stock market has always been up and it is likely to continue in that direction unless something very scary happens in the world.”

There are some time tested strategies to build up solid stock portfolio;

o Always buy the stock of well-managed companies and hold them for as long as they keep growing.

o Set aside some amount for regular investments and do not be affected by short-term market fluctuations.

o Try to always buy when the market is at its low.

o Reinvest your earnings to gain the benefits of compounding.

o Do not put all your eggs in one basket. Diversify your investment in at least 8-10 stocks.

o Start investing now. Do not wait for a better time to come. We have many more Stock Market Investing Articles Now Available.