Difference Between Trading and Investing

Although some people use these terms interchangeably, there is a key difference between traders and investors. Both groups are trying to profit from the financial markets, but their approach is different. And the key difference comes down to time. Traders usually buy and sell assets over a shorter period of time, typically within a day (day trading) or at the most a few weeks. Investors on the others hand buy and sell assets over a longer period of time, usually over years.

Within investing, there’s two more types. Active investing and passive investing. Active investors check/rebalance their portfolios periodically. In addition to that, for the most part they pick their investments themselves. They decide what stocks they want to invest in, what bonds they want to buy etc. Passive investors on the other hand are investors who do not know too much about the financial markets, but wants to be involved. They don’t have the time or the experience to pick the right stocks or other assets. Which is why they invest in assets that are either managed by others or don’t require active management ex: mutual funds, index funds.

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