PFF Panel 3
Seedly PFF 2019
Asked on 02 Mar 2019
Trading is when you hold stocks (or any investment really) for a short period of time and sell it off when you have gains. You'll be more inclined to look at the technicals such as price movements, moving averages, etc. If the price drops, you'd exit to cut loss, even if the fundamentals of the company are good.
Investing involves a significantly longer time frame and you would normally hold for at least a year or longer. You will want to look at fundamenals such as the company's financials, profitability, moat, etc. Even if the price drops, as long as the fundamentals are good, you would still hold on.
There is also a hybrid concept, which is to trade around a core investment position, whereby you invest in something, but if the price goes up enough, sell off a portion to lock gains, while still retaining a large stake in your investment.
The nature of trading is relatively short term while investing you need to be ready for the business to grow. That takes time.
For investing the magic happens when your wealth compounds with the company for the Long term. Not many traders are able to capture those gains. Best example in history is Warren Buffet. Learn how compounding works and you'll skew towards investing. I'm biased hahahah
Wong Ming Yao, Product and Community Associate at 8VIC Global Pte Ltd
Answered on 10 Dec 2019
Trading is where you buy and sell stocks to earn from the Price Difference.
Investing is where you study the business and its sustainability, then have a rough gauge of their business value. And then you buy into the company for a longer time frame and let the money compound for you!
To put it simply, trading is short term and investing is for long term.
To add on my personal thoughts, trading is kinda like gambling and hoping, and investing is about buidling conviction and going back to fundamentals.
One similarity though - is both will bring you on a emotional roller coaster, however investing is like wearing a seat belt, and trading means no seat belt!
Trading - speculative in my opinion. Must be very good in chartting and technical analysis to win the game. Short term profits.
Investing - as long as you buy into a good quality company and buy in at the fair valuation, you would be okay. Investing in great company and sit tight in it is the only way to create wealth.
When you are trading, you are mainly concerned with the share price movement in few hours or few days period.
When you are investing, you spend more time focusing on the growth of the businss and fundamentals. You are likely to invest 3 years and follow the company closely.
Trading - you will need to eyeball charts and indicators before entering a position. You need to have an exit strategy whether its profit taking or cut loss. Trade positions can end in a matter of seconds. You can also swing trade where positions are held overnight or for a short period of time. Examples of instruments are futures, forex and options.
Investing - normally for a longer period of time. Can be days, months or years. I'd say fundamentals play a bigger role here; technicals may or may not be used to find an entry point depending on your philosophy. Instrument involved is usually stocks.
Trading is about having an opinion on the short-term price direction and trying to earn the price difference (can by magnified by margin) by taking a long/short position & subsequently closing out the position hopefully for a net profit (taking into account of trading costs) in a short span of time
Investing is about being confident of the company's long-term fundamentals and holding it for a certain period of time in return for dividends and capital appreciation
Investing is when you put yourself into the position of the company as if you are a shareholder. As a result, you will be concerned with the rise or fall of the company.
Trading is when you put yourself into the position of a spectator and watch the company rise or fall.
Here is everything about me and what I do best.
Trading does not read into a company's financial standings such as Balance sheet/Cashflow statments. It relies on trading signals such as moving averages, MACD to make decisions. The decision tend to be short term by nature.
Investing on the other hand requires research into the company's financial standing also known as fundamental analysis. It bears little reference to trading signals. The investment decision tend to take middle to long term perspective
Trading is usually for short term profits where people monitor the markets and buy and sell stocks to try to make money in a small time frame. Traders usually focus on a stock’s technical factors rather than a company’s long-term prospects.
While for investing , it is usually in the long term and they hold stocks when the market is up and down. When investing, people usually study the prospect of the company and study whether they have confidence in the future of the company.
Hope this helps!
Trading requires constant monitoring of the market, less so for investing.
The skills you use for both are also extremely different. You would need to learn technical analysis and charting for trading, whereas investing requires a more in-depth look into the company and its valuations.
Nicholes Wong, Diploma in Business Management at Nanyang Polytechnic
Answered on 03 Mar 2019
Trading is usually to buy and sell stocks for short term profit while investing is usually holding stocks for long term gains.