Differences Between Stock Investing and Trading

Stock Investing

Stock investing and trading are two mistaken and misunderstood concepts of financial sphere.

Difference between the two is commonly neglected and then consequently subjects involved encounter unexpected losses and negative returns.

It generally happens to those with no clarity on the topic.

Millions of retail investors enter the financial market with a mindset of a trader while expecting returns of stock investing.

Although trading and stock investing enter and gain from the stock selling, holding and buying shares.

Nonetheless, the line of demarcation is to be recognized and conceived, in order to save our investment from getting doomed.

There are several distinctions in both the approaches as follows:



The Goal of a trader is to accumulate wealth by buying and selling of shares in a shorter period of time.

Trader makes stances by being intensely vigilant of the market fluctuations.

He/ she buys stocks on lower prices and as soon as the share cost goes up, they immediately sell the stocks.

Stock investment

Investors also aim to generate high returns, but they accomplish it in drastically different mode.

They invest money into financial securities such as, bonds, equities, mutual funds etc. and let their money grow.

Herein, the growth of money happens under the combined effect of reinvesting, compounding and profitable returns.

Read More: NPS vs SIP: Which is a better investment plan?



Risks are ubiquitous in financial world. However, the manner of management of risks is what counts in.

Since, trading is characterized by its short- term goals to achieve high profits from the market, it is indeed a precarious deal.

Thus, trading poses relatively greater risks than the risk involved in stock investment.

Stock investment

Companies or subjects who invest in share market too face risk of losing their capitals.

This is due to its dependence on the market conditions. Investing in shares for short- term is vague as it generally results in deplorable returns.

Nonetheless, long- term investments in stocks are highly likely to generate favourable levels of profit.

People invest money and allow it to grow through compounding and reinvesting.

Thus, stock market is less risky when taken for long- term goals.



In trading, stocks are bought and held for a short time for higher performance.

The duration of the stocks being detained may vary from a day to a week.

However, more often it takes a day long. Before committing to any stock, traders generally analyse recent tableaus, statistics, graphs, and charts.

They do not focus on the basics of the company in which they are about to invest.

Stock investment

It works by buying, holding and selling shares for long- term durations. The period of holding of stocks depends upon individual investment goals.

Thence, short- term fluctuations do not bother the investors of the stock market in long- term engagements.

Before espousing any company to invest into, they thoroughly scrutinize ins and outs of the enterprise. These fundamentals of the company are about its records, progress and prospective possibilities.

Their perspective stretches into the future unlike traders who are solely bothered by current circumstances.



Trading requires consistent surveillance of market oscillations in order to seize the right opportunity to vend their shares at higher rates and earn profit.

Its management needs daily analysis of reports and figures of money market. It asks 3 – 4 hours of everyday alert vigilance on the stock market trends to earn profits at high risk in short time.

To be a successful trader demands a challenging degree of expertise and proficiency in the finances of the stock market. Traders are highly- skilled technocrats.

Stock investing

Most of the time is put in the analysis of fundamentals of the company which can be done once in a week or even a month.

Investors need not be prodigals in finance matters to manage their investments in the market.

The timing in Stocks investing, however, is slightly flexible in nature as discussed above.



Trading is a high- risk shebang which involves investing big capitals for a short with an aim of multiplying their investment.

For this, they continuously eye the market movements to grab the advantageous moment and trade their shares.

Trading is the skill of timing the market.

This is risky, nonetheless, traders earn 5- 10% of monthly returns from a single trade.

Stock investing

Stock investing is a long- term deal and may deliver the returns of 10- 20% annually.

Money of the investors keeps on evolving with time owing to the power of compounding.

Although investing money for short- term in stock market is not much appreciated affair.

This is because investment in stocks needs some time to grow it will be redeemed at base return with 2 — 3% average profit.

Thus, stock investments prefer long- term negotiations unlike trading wherein all matters arise and quell more quickly.

Investment is the art of wealth creation by holding stocks of different companies for a longer period.


Trading is exclusively a field for those who are technically proficient in handling the market value data.

While investing does not require any in depth- grasp on the subject and can be initiated with basic research of the company.

From whatever that has been stated so far, it can be safely concluded that one has to be cautious about choosing the strategies of investment.

One should analyse and understand their goals and extent of expertise and knowledge before entering into the financial market.

Further Reading:


Team R Wealth

Team R Wealth

Related Posts

Leave A Reply

Your email address will not be published. Required fields are marked *