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Abhibyakti Singh

Abhibyakti Singh

Executive Assistant, LXME

investment vs trading

Trading and investing are often used interchangeably. In reality, the two terms are very different from each other! In this blog, we’ll discuss trade and investment as well as which is more suitable for women: investing vs trading.

What is Investing?

Investing refers to allocating money with the expectation of generating profit over time. For example – You can invest in assets such as stocks, bonds, real estate or mutual funds, with the goal of achieving a return on your investment over the years.

What is Trading?

Trading refers to buying financial instruments with the aim of generating short-term profits.While investing involves a long-term approach with a focus on capital appreciation, trading involves more frequent transactions and takes advantage of short-term price fluctuations.

Now let’s understand trading vs investing

Trading Vs Investing

PARAMETERSTRADINGINVESTING
ObjectiveGenerating short-term profitCapital appreciation
Time HorizonShort TermLong Term
FrequencyFrequent buying and selling of securityBuying and staying invested for the long term
RiskHigher Risk, due to price volatility in the short-termLower Risk, as you can ride out market fluctuations in the long term
MonitoringRequired continuous monitoringRequires periodic review and monitoring 
EffortHigh effortLower effort as compared to trading

Which is better for a woman investor: investing vs trading

To determine which is more suited for you, ask yourself the following questions: 

  1. What is my financial goal? 
  2. What is my risk tolerance?
  3. What is my time horizon?
  4. Am I a financial market expert?

It should be noted that 90% of the traders lose money while trading! This is why we at LXME say, take SIPs not TIPs! Here’s why:

  • Higher chances of losing money in trading, this is because traders usually commit the following mistakes
  • Trying to outsmart the market 
  • Overtrading to recover losses
  •  Averaging their positions
  • Focussing on TIPS
  • Trading meets short-term needs, however, investing meets short as well as long-term needs
  • While trading, one has to time the market, in investing, one doesn’t need to time the market.
  • Investing may involve periodic review of your portfolio, while trading requires continuous monitoring of market movements. If a woman decides to invest in mutual funds, she doesn’t even need to monitor her investments every minute as MFs offer expert management by fund managers.
  • Trading requires deep knowledge of the market and its movements. On the other hand, investing is more straightforward and suitable for all women 

Check out LXME’s time and goal-based portfolios and  invest in mutual funds online for your goals! Also,  learn investment on the LXME app.

In conclusion, the difference between trading and investing is in terms of the time period of investment. While trading requires an experienced hand, investing in instruments such as Mutual funds, is simpler and can be done by anyone, even a beginner. At LXME, we always say take SIPs not TIPs!

FAQ’s

What is the main difference between trading and investing?

The main difference between trading and investing is in regard to the time period of investment. Trading is done by many with the aim of earning short-term profit by catching volatile market movements while investing is generally for the long-term to create wealth and achieve financial goals & mitigate volatility risk.

Is investing better than trading?

Trading requires a level of expertise while investing in instruments such as Mutual funds, is simpler and can be done by anyone, even a beginner. The ideal choice is to go for investing, as there is a high risk of losing money in trading.

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