Every investor comes up with a different investment goal and accordingly, they are investing in the market. Some investors have an objective to earn a daily return, whereas some investors wait for the long term to earn a high return. Those who invest for a short period or invest to earn daily returns are known as traders. While one who is investing for a long period in the market is known as an investor. It is important to identify whether you should choose trading or investing.
Meaning of Online Trading and Investing
Online trading refers to the process of buying and selling stocks for a short period. To generate returns in online trading, online traders use to do intraday trading. Online traders are also known as intraday traders because they earn a return on their investments through intraday trading. In intraday trading, one buys the preferred stocks at the start of the day. Intraday traders come up with the motive of booking profit by squaring off their position at the end of the trading period.
On the other hand, investing is a long-term process. In investment, these long-term investors generally buy the instrument and hold it for a longer period say 3 to 10 years. The motive of these investors is to invest in the fundamentals of companies and grow their wealth by doing it gradually. Online traders earn returns through the value of stocks, when the price of the stock rises they sell the stock and make returns out of it. While long term investors have different ways of earning such as dividends, stock splits, interest and much more.
Benefits of Online Trading and Investing
Both online trading and investing is a process in which traders and investors are investing. The fact which makes them different is their objective from their investment. One invests intending to earn a daily return and one invests for a long-term period. Let's discuss the benefits of both online trading and investing:
Online trading
- Daily returns - Online traders earn daily returns with the help of price fluctuations and volatility in the market.
- Cheaper - Compared to long-term investing, online trading is cheaper because it saves the cost of advice from the brokers of the market.
- Eliminates the middleman - In online trading, traders are allowed to trade without any middleman such as brokers.
- Online traders have high control - In the past, traditional traders buy and sells with the help of brokers. But currently, online traders have high control over their investment they can sell and buy at any time without asking.
Investing
- High returns - In the majority of the cases, long-term investors make more returns compared to online traders as they invest for a long period.
- Low risk - Investing come up with low risk as compared to online trading. In investment, investors are investing in the fundamentals of companies whereas, in online trading, one has a high probability of losing money because of high volatility.
Difference between Online Trading and Investing
- In online trading, traders are concerned with price volatility and price fluctuations. Whereas investing is all about the financials and fundamentals.
- Online traders make daily returns, whereas investors use to ignore daily returns to earn high returns in future.
- In online trading, there is an elimination of middlemen such as brokers. In investing, one needs a bit of advice from brokers.