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Differentiate between investing and trading.
The major differences between investing and trading are as follows −
Investing
Creates wealth over a long period of time.
Buying and holding.
Market fluctuations has no effect.
Add on benefits − bonus, dividends etc.
Fundamental indicators are EPS, price to earnings, current ratio etc.
Long term period.
Creates wealth by compound interest and dividends.
Low risk.
Industry, economics, financials, competitors etc. will be affected.
Very few brokerage charges.
Makes sound investments.
Trading
Generates profit frequently.
Buying and selling of stocks.
Daily market fluctuations will effect.
No add on benefits.
Technical indicators: moving averages, stochastic oscillators etc.
Short term period.
High risk.
Psychology of market, money management, risk rewards etc. will be affected.
Have brokerage charges.
Requires active environment.
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