Very well, two great issues for which I have been asked a lot.
Let’s define Invest : It means to put a resource with the intention of obtaining something in return, may or may not necessarily include the initial resource. We can invest time, knowledge, money … etc.
In the case of investing money, the ideal is always to invest a capital, and obtain in exchange that same capital along with additional returns or profits.
As it is, trading is a way of investing .
Let’s define Trading : As its name indicates (exchange or sale) it is characterized by buying or selling assets .
Assets can be currencies, company stocks, cryptocurrencies, etc.
And just as you can earn by buying low and selling high, you can earn by selling high and buying low. To understand this a bit, you could watch this other video .
The fact is that with trading, one buys and sells with the aim of winning in the transaction and the movements are relatively short-term, we are talking about buying a share to sell it in minutes, in an hour, in a couple of days or maximum some weeks.
Traditional investment on the other hand, also known as ” Value Investing ” or something like Investment in appreciation, seeks only to buy low to sell high, and is usually done in the long term, with times ranging from months, to years or decades.
This is where we consider the financial status of a company, the economic projection of a country, or any factor that could affect the value of the asset in which it is invested in the future.
We also look at strong, stable, reputable, and slightly more secure assets.
In trading we look for growth opportunities so these things are not so important and sometimes we bet on the success of a new company that has not proven finesse.
Differences Between Trading And Investments
The term and the risk .
Usually trading involves higher risk and therefore higher profitability or potential to earn more money.
So some people manage to generate monthly income and make a living from trading.
Still, it is estimated that more than 80% of traders fail to be profitable .
And only a small percentage of traders earn enough to quit their jobs and dedicate themselves fully to trading.
It’s not that it’s impossible, it’s just not common.
On the other hand, traditional long-term investments such as investment funds, indices or shares of consolidated companies are of lower risk (just as all types of investment involve risk).
And in the long run even with the ups and downs of the economy, you are less likely to lose money. Especially if you put together a good portfolio.
Traditional investment seeks to preserve and grow wealth little by little .
It’s what pension funds, insurance companies and billionaires use.
Trading on the other hand is a slightly more niche activity and requires good knowledge, understanding the market and knowing how to identify signals using different tools.
Trading generally tends to be much more complex and varied than traditional investing.
Personally, at the moment I am not interested in trading and I have preferred the traditional investment path where through certain investment instruments I have achieved a 15% EA for a few years.
Whatever your preference, you should know that you should not invest in what is not understood. And that you should never invest all your money in an opportunity, incredible as it may seem.
