Investing isn’t Trading

When it comes to trading, it‘s always a pet peeve of mine when people interchange trading with investing.

A lot of people do it and see nothing wrong with it. I have a younger brother who has also worked in the financial industry for quite some time but not in the same capacity as I did- he is a programmer while I was a trader.

So.... if investing and trading are different, what is it that divides the two?

When we talk about investing, we refer to buying and holding something for an extended period of time, whether it be months or years. Usually with investing, we don’t care about what happens over the short term while with investing, we are constantly trying to buy low and sell high, over a shorter time frame, and as many times as possible.

Here‘s a different way to view the two:

Investing would be the equivalent of believing a giant shopping mall will be built near a small town so you buy property, build a house, wait for the shopping mall to be built, and if it does end up being built, you cash out and sell the house for much more than you spent. If the mall is never built, you try to salvage as much of the money that you put into the property and house.

Trading would be ignoring the shopping mall, buying an already built house, renovating it, and trying to sell it after the renovation for a profit or if you have problems selling it, maybe you just rent it out.

It really is a huge difference when you think about it!