Introduction

Hello, friends generally income streams are of seven types out of those seven types three types of income can be from this stock market. Because we have to trade in the share market we get transaction income, Then if we have dividend-paying stocks in our portfolio then we get portfolio income. And if you make a long-term investment in the stock market you will get a huge sum of money due to the compound effect, this is called capital gains. These three types of income streams we can get from the share market and if you want to trade or invest in the share market you need to open a demat account. If you have a demat account you need to develop knowledge about the market i.e. trading and investing which is what we are going to cover in this blog.

Investor’s mindset

An investor’s mindset is different from a trader’s mindset. An investor’s goal is to make a good investment in long term and get more money as a return. So they invest in stocks, mutual funds, bonds, and other financial instruments and hold for the long term. Investors don’t need to keep track of the daily performance of the shares they invest in and They reinvest the returns they get and keep increasing their portfolio value.

Traders’s Mindset

When if you see a trader who uses his knowledge to see how much profit he can earn in the share market daily. If you want to become a trader you need to know about technical analysis well. A trader’s goal is to generate profit by timely entry and exit in the market fluctuations in a short time period. An investor thinks how to get 10 to 15 percent return per year but a trader thinks how to get 10 to 15 percent return per month. We are now going to look at some key points to understand the difference between investing and trading.

The Key Difference Between Trader and Investor

1. Time Period of Investment

What traders usually do is hold the stock they want to buy for a short period of time. It could be a week or a day or even a few minutes. Usually in intraday trading, they pick a stock that is performing well and buy it at a low price and sell it at a high price on the same day and see a profit.

But if we look at investors like this, they will follow the buy-and-hold principle and hold the stock they bought for at least one two, or three years. Some investors will invest for up to ten years and how long they should do this depends on their financial goals. An investor has no exposure to short-term volatility in the market but invests based on their fundamental analysis. To begin with, traders will look to profit in the short term but investors will look to make more profit in the long term.

2. Wealth Creation Method and Risk Factor

Generally, traders follow the market pulse pattern by buying when the stock price is low and selling when it is high. The investor’s wealth creation method is to find some quality companies and buy their stocks and hold them for long term. Now if we look at the risk factors, generally if we have to invest in this type of financial market, the risk is high. It is in that risk management that we decide whether our investment is profit or loss. Whether as a trader or an investor, we need to do risk management but a trader takes more risk than an investor. Traders will look to make more profit in the short term but the investment will get less profit in the short term but more profit in the long term through dividend and stock compound effect.

3. Trading is a Skill and Investing is an Art

Trading is like a one-day cricket match with limited overs. The more a trader is a skilled player the more runs he can generate i.e. more profit. Investing is like a test match where it is more important to stand long than to score more runs. Because investment tests your patience, determination, and confidence, that’s why we call it an art. If we look at it from an investing angle, then Warren Buffet has been a famous and Best Test match player in this world. Decide for yourself whether you want to be a great test match player like Warren Buffett or a skilled limited-overs batsman.

4. Time You Like to Spend in the Market

If you want to be a trader you need to keep track of what is happening in the market for at least 4 hours a day. That too if you are a day trader you should be very alert during market active hours. Generally, the share market is very active during opening and closing times. Since trading consumes a lot of your time, it comes under the active income category. But if we look at an investor he spends less time in the market than a trader. Because most of the time he can spend in the market, he spends doing fundamental analysis of the company.  After selecting the best company and doing that he will relax. An investor spends only two or three hours a week so it comes under the passive income category.

5. Trading or Investing?

Before deciding whether you want to be a trader or an investor you need to define your financial goal. Then you have to look at how much time you want to spend to achieve this financial goal. If you want to be a trader in the market hours you have to trade very carefully. Not only that but you have to decide in advance that you can pick this type of stock the next day. 

Conclusion

Being an investor is a great decision for you whether you are a beginner or you cannot spend much time in the market. But the bottom line is that whether you are a trader or an investor, you must have a demat account. I hope this post is very useful for you and if you like this post please share it with your friends. Follow our page to consume such good content. Follow us on YouTube and Instagram to know our daily updates.