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.