After achieving success in the business world, you may find yourself with a substantial amount of money you do not know what to do with. While this sounds contradictory and unbelievable – who would not know what to do with some extra cash? – it is actually more than plausible.
If your business starts developing according to your plans and you manage to cover all costs and expenses, your financial situation can easily become rapidly better. But what to do with the bonuses – open up a restaurant, hire more employees, go on a trip around the world, start an expensive hobby? Among the most sensible ways to make some more money and keep on piling for the future is to invest a part of it, or, on the other hand, engage in trading business. Not only can you become more aware of the harsh competition in the business world of today, but also reach financial goals you have set for yourself. In order to fully understand the differences between these two techniques and what may be the right for you, here are some tips and details.
Time is Money
The first thing that people should know regarding investing and trading is that, like any business, you need to know how to effectively manage and save time for it to become profitable. That means knowing where you actually spend your money, who you give it to and when you can expect to get some of it back. And answers to these questions really separate these two things.
So, while trading is usually defined as “the activity of buying and selling stocks”, investing is all about buying “shares, property, or goods because you hope that the value will increase and you can make a profit”. This is the gist – you invest in something because you want its value to increase so you can get more money out of it over a longer period of time, and trade stocks because you want to be present on the market and earn something rather quickly. These are very similar techniques, but the real difference is in the time period when you consider liquidating your money. Deciding on the longevity of your plan will help you choose between investing and trading.
Choosing the Project
Again, a thorough research is needed when picking the thing you want to invest in, and it is also important to know how active you want to be in that process – if you are willing to spend days on the stock market, investing and following charts in order to pick the best options, trading is the right path for you. There are also the people who can teach you how to trade, as is the case with Tim Sykes, a veteran who provides a lot of info on this field in all of his posts.
However, if you are closer to the idea of giving your funds to someone who is ready to do the most of the work for you – like buying and holding stocks, opening a venue or a new company – then investing should be your pick. After all, trading can gradually become a full-time job and will require your patience and focus, while investing is much less time consuming and generally performed less actively.
Differentiating and Finding a Personal Approach
In a field as wide as trading and investing, there are numerous opportunities and approaches you try in order to find what suits you the best. There are various types of traders depending on the amount of work they do and who they collaborate with, so they are generally classified as position traders, swing traders, day traders and scalp traders (positions held for several months/years, days/weeks, hours and minutes, respectively).
On the other hand, financial investments are separated into traditional and alternative: the former means setting aside a certain amount of money and investing it into assets like bonds, shares and real estates, and expecting it to earn money over time due to interest, while the latter includes investing in more alternative things, like precious metals, art, expensive cards, art collections, etc. While both are profitable, it is only a matter of choice.
So, what it all comes down it is the simple question – do you want to be more or less actively involved in your financial investments or not? Depending on your personal preferences and the amount of time you can dedicate to this, choosing between investing and trading will come naturally to you once you know all the relevant facts. However, you can try both at the same time, and then gradually lean towards one.