Tuesday, May 14, 2013

investing or trading

Some may confuse the terms investing and trading. From wikipedia, investing is putting money into something with the expectation of gain, usually over a longer term. But hey, that sounds like trading except for the time qualifier, that is, "over the long term". I guess that is where the difference lies. Which is better? I go for investing, that's what this blog is all about. I must admit though that I have tried trading stocks and currencies before. Did I make money? Yes. Did I lose money? Yes as well. In fact, that would pretty much summarize why I prefer investing. The 2 steps forward, one step back approach does not fit with my personality. Even the best traders in the world will experience a loss. What makes them better is not that they make the correct trade all the time, its simply that their winning trades outweigh their losing ones so overall, they make money.  If you enjoy analyzing charts and data, and have the attitude of a trader, then go for it. But before you dive in, educate yourself first and try demo accounts. Also, put only money you can afford to lose. A special warning goes out to those who may be getting too confident with their trading abilities in the Philippine stock market, do not confuse your "exemplary" trading abilities with a general rise of the market. I see an increase in the number of blogs and forum touting stock and currency trading as an easy way to be rich. If you are not prepared to put in the hard work, then you will certainly lose money in trading and may just as well gamble your money in a casino. Remember that a trader's goal is to make money in the short term, whether in a rising or falling market. An investor, on the other hand, expects to make money in the long term and his goal is to buy investments when they are cheap and sell them when the price is right after several years. Happy investing!

1 comment:

  1. Very good point. I hope people realize that the profits they are making now is because of the general rise in stock prices, and not because of their own skill.

    And hopefully they realize this isn't how it normally is.