Investing Articles

One needs to know the essential difference between investing in a company and investing in a share. When you buy a share, you do so because you see a movement in that particular share in the market. You wish to profit from such movements and you use many tools to arrive at your trading calculations like fundamental analysis, technical analysis etc. Your main intention is to make profits as quickly as possible. You have no permanent interest in the company as such. You wish to buy the share at the right time and sell it at the right time too. Once the transaction is over, you move to the share of another company that you think is profitable to invest. Or deal with the same share from a different position; provided you feel that it is going to fetch profits.

You invest in a company after doing detailed analysis and feel confident about its long-term growth potential. You are sure about the standing of the products of the company and that it commands a good reputation. Even when the price of the share of such a company drops, you are able to estimate whether it is a short term feature or the impact is long term on the price of the share. A person who buys the share is a trader, whereas an individual who buys a company is an investor. A trader may or may not hold a share for a long time, but an investor normally has the intention of holding on to the shares for a long time.

When the going is well, whether you are an investor or trader, the sailing is smooth and both are happy with the outcome. When the market takes turn for the worse, an intelligent trader, if he has set the stop loss limits, can end up the trades with small losses. He can certainly avert big losses. Even in such dire situations, if the trader keeps faith in the company and persists with retaining such shares, with the hope that the company will turn the corner, such an individual is no more a trader, but an investor.

If trading considered being a brisk race, investing is a marathon walk. Investing is for future gains, you are wiling to wait. Trading is a brisk activity to make quick profits. Investing assumes the form of passive activity, once you buy the share. You wait patiently for the fructification of the profits that you have estimated. Mostly, the results will be in favor of the investor. Trading is very active pursuit of the profits. Take day trading, for example. At the end of the day, you have the tally, whether you are in profit or loss.

For trading, volatile market conditions are ideal. An intelligent trader will welcome the prices of shares going up and down at great speed. The timing of the trade is his strength. Investing and trading are, however, not diametrically opposed to each other. They are inclusive activities. Many good traders can be good investors as well.

If you invest in a healthy portfolio and if that portfolio continues to remain healthy, it will turn out to a great activity. As for safety, investing is considered superior to trading. Do trading with a small part of your capital and invest the major sum. This, carried out intelligently will meet your short and long term needs respectively.

The nomenclature of trader does not mean, however, you need to do brisk trades always. A trader works to a plan. He has clearly defined entry and exist routes. He has the remedial measure ready for the possible losses, and he knows when to book profits on the trades.

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