Skip to main content

Trading and Investing

Trading vs investing which is better? There are always people who say that the safest way to make money in the stock market is by investing for the “long term”. Both investing and trading have their own advantages and disadvantages.

1. Professional traders can make money in any market condition. Unlike a long term investor who only makes money in bulls market and loses it in a bears market, a good trader can take advantage of whatever the market throws at them..

2. There is no law that says strong companies have to go up. People have a false image in their mine that if you own Reliance stock and they make a sale your stock goes will up. That is not the case. You could buy a stock that makes tons of sales and has great fundamentals and still lose money.
3. Successful traders base their conclusion off of price and the trends and patterns that it forms. This is a much better way to grow your money because what you ultimately make money from what the stock does not what the company does.
4. The mindset of holding onto a stock forever can actually hurt you. I have seen people with a long term prospective ride a Rs.500 stock down all the way to a Rs.50, because they are in it for the long term. As far as I am considered it not a good idea to hold a stock through a 90% decline in hopes that it might one day rebound no matter what your time frame is.
5. Actively trading can give you higher returns. If you are actively trading in the stock market you will be able to learn from your past trades. The more you learn the better a trader you will become and the higher returns you will make.
Having said all these, the Warren buffet has made consistent money by Investing only.Well everyone cannot become a Warren Buffet.

Popular posts from this blog

Historical Sensex Returns Updated - 2024

Historically Sensex has given returns of about 15% per year, despite volatility and price fluctuations of about -20% to +60%. The following table shows S&P BSE Sensex historical data - start  & close values and the yearly returns of the sensex from 2000 to 2024. So far during the year the   index has hit an all-time high of  75,124   and despite markets hitting all time highs not all stocks make all-time highs. There are many stocks still below their highs. Stocks like HDFC Bank, ITC, Asian paints are still well below their highs and some of them have given low returns over last 3-5 years. Individual or Retail investors can achieve consistent returns through investing via mutual funds , whether it be active or passive. Chasing returns from individual stocks is futile. Be a wise investor !

Tracking Difference in ETFs and Index Funds

 As we all know, an index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the Nifty 50 Index. Tracking difference is the discrepancy between Index Fund/ ETF performance and index performance. Below is the ETFs and Index funds with high tracking error.  The above tracking error is since inception. ETFs and Index funds are considered to be low cost, but in here in India, the tracking difference are quite high and add to that expense ratio, the total works out to over 1-3% and higher in certain cases.  These ETFs and Index funds are no longer low-cost as one would expect them to be.