What is the difference between trading vs. investing?

Written by Eric Ebbert CFP®, MBA

On January 21, 2021

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People who want to grow their wealth while saving for a future goal should consider investing. For many people, investing takes place in the form of contributing to a savings or retirement account. However, you can also invest into money market funds, exchange-traded funds (ETFs), mutual funds, stocks, bonds and more in a nonretirement brokerage account.

However, if you are new to investing or are wondering how it works, you might be wondering if it is the same thing as trading. While both trading and investing seek to make a profit in the stock market, they do so in different ways.

Trading vs. investing

Traders are investors who buy and sell stocks usually within short periods of time with the goal of making quick profits. They may buy and hold stocks for weeks, days, or even hours and minutes before turning around and selling them for a profit.

This kind of investing can help someone make a profit, but it generally requires a lot of effort and involves a lot of risk. Making a bad bet, such as the recent r/wallstreetbets incident on Reddit, means a trader risks losing a fortune.

Traditional investing has a longer-term outlook. Investors have long-term goals, such as saving for retirement or for a home or a new car. They tend to buy options that will mature over the years and generate profits in interest and in selling them. 

Investing is not as hectic as trading, but it still requires a well-thought-out strategy for balancing your portfolio with an asset allocation, minimizing your expenses and maximizing your profits. To do this, many investors choose to work with a professional financial advisor.

Talk to a ProVise CFP® professional about your investment portfolio

Managing your investment portfolio on your own is like trying to navigate through a new city without a map or GPS. However, a financial advisor can act as your guide to help you make investment decisions that work for you to help you reach your goals.

At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about balancing your portfolio? Contact ProVise today to schedule a complimentary consultation.

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