Trade or Invest

Trading v/s Investing – What to choose? Free Guide

“What Should I choose: Trading or Investing? ” 

Investing and Trading are two methods through which you can make or generate wealth. Through trading, you can make huge money in less time, but it requires some serious skills. Also, the greater amount you trade with, the better are your returns. 

trading or investing

While investing can help you create wealth in the long term. This is because investing grows your money by allocating some asset(s) that will grow over time or create another stream of income for you. But keep in mind whether it is investing or trading, both have some requirements, and you should choose what suits you best. Also, there is an equal chance of losing all your money if you don’t play your cards right.

A lot of people are confused about whether they should choose Trading or Investing. The fact that you are here reading this article proves your concern too. So, I think I can help you by giving you some useful insights. I’ll be telling you if you should put your money in long term investment or short-term trading.

But First You should ask yourself some questions:

1) What are your goals?

2) How much time do you have?

3) Do you have patience?

4) How much money do you make?

5) What is Your Risk Appetite?

It would be best if you had unclear thoughts while trying to answer the above questions. Yes, having doubts is the best situation as it opens the door to improvement. Moreover don’t think that you are alone. 

What are your goals? Long-term Investing or Trading?

Let’s start with the first Question, “What Are Your Goals ?” 

Before getting into this game of creating wealth, you need to know. You have to know whether you are interested in creating generational wealth or quick bucks.

Creating a generation-like wealth is, however, not a piece of cake. You have to run a marathon and aim for long term investment. Because to create long-lasting wealth, you will have to make friends with Compounding and Patience.

Compounding takes time. The longer you wait, the more you get. The slope is exponential rather than linear.

While Trading is a quick “enter and exit game” in which you buy and sell shares within one day. Furthermore, if you think trading is easy to make “Quick Bucks”, you couldn’t be more wrong about it. Trading is Surely a thing which can help you to make some extra money. But it also requires some extra and well-practised skills; otherwise, you will lose some serious money, which will compromise your goal of becoming wealthy. I am not saying trading always results in losses. But it requires some serious skill and a focused mind with no ego issue. 

Because when it comes to money, we all get sensitive and fearful. If you think you have the proper skills to trade, then give it a shot; otherwise, stick to long term investing.

How much time do you have?

You have to be honest with yourself because most people want to become millionaires or billionaires, that too overnight. I hate to tell you, but it doesn’t work that way. Most people choose to trade because they think it is easy to create wealth through trading. People Always talk like, “Do you know he made $1000 in just 1 hour through trading!” But do you know how much practice and experience is required? How much Quality Screen time one has to do to pick that one game-changing trade of the day? 

Stick it to your mind – “Money Never Comes Easy”. All those flashy quotes and Lamborghini owners never reached to top by doing some cheap “Quick Money Making”. Do you know that most of the wealth of great investor “Warren Buffett” has come from the power of compounding?  

Say you are a teen or in your early 20s. In that case, I highly recommend you start investing your money in some Index Fund as soon as you can. Let compounding do its job, and I assure you can be relaxed about your retirement. But if you think you have time to learn new skills like trading and have a “Trader-Mindset”, you can give it a try. It’s going to be a tough journey, but once you master this skill, it will benefit you for the long term by making some side money through swing trading.

But suppose you are at an age where you have less time and don’t want to take risks because of upcoming retirement. In that case, I advise you to invest your money somewhere safe, where you can get a good return without any Hassle. Like any Mutual Fund or some physical asset. Do your Research or Talk to your Portfolio Manager before you take any decision.

Time

How much Patience do you have?

Till now, I hope I have helped you a little by giving you a reality check. So Now Let’s Come to Our Third Question “How Much Patience Do you have?” 

Because as I said earlier, investment is not a sprint; it’s a marathon where you will run for long. But What lacks in most the people is “patience”, and patience plays a key role in investment. I have seen many people who don’t want to put their money for the long term because they don’t have the patience. Patience to put their money and watch it growing day by day for a decade or two. I am sure people have their reasons, and that’s when they decide to opt for trading to make quick money.

However, I still don’t recommend trading. As I stated earlier, trading is not an “overnight Wealth Scheme”. Even in trading, patience and Luck play an important role. You have to be patient to see the decision that you have taken in trading is right or wrong? Whether it’s going to make you money or going to lose your money? Also, if you get impatient for even a second, you may end up losing everything.

So to conclude, you need to have patience, whether it is trading or investing. Whenever it comes to money, you must have this trait of “Patience” because success requires time, don’t let those ads and luxury cars fool you. Furthermore, I request you to please have a mindset where you can have patience with your money. Once you have that, it will be a game-changer for you.

How much money do you make?

Money

The fourth Question is Quite Easy, and it’s a reasonable check of what should you do? 

You can be a college student with little pocket money. What you can do here is – either save a portion and invest or get a side job! If you can manage your studies and job, its perfect. You can have more money, and you can invest early. 

I recommend you start investing in an Index fund, as I stated earlier. Remain invested for 20 or 30 years, and you’ll see the power compounding holds.

However, I won’t ask you to trade. Because – 

  1. It would be best if you had significant capital to earn a decent profit in trading. Being a college student, it isn’t possible.
  2. Say, somehow you got the capital. But you still a good knowledge of reading charts and analysing stocks.
  3. A bit of luck here is important too.

Because if you want to play a game, you have to know the rules. Otherwise, you will end up paying the penalty. And when the penalty is for money, it is going to take a troll! 

What is your Risk Appetite?

Risk

At last, the main question comes, which also targets your “Ego”. How much of a risk appetite you have? Because many people I know want to be a High-Risk taker because it sounds cool to be a “Risk Taker”. But let me give you a reality check, it doesn’t sound cool after you lose what you have risked. So give yourself some time, do some maths and budgeting and see how much money can you put at stake? If you have enough knowledge and experience in trading, it is fine to give it a chance. 

But if you are clear that you do not want to take much risk and set your mind free from researching on fundamental of stocks or technical analysis – 

I recommend you opt for some good mutual funds like Blue-chip Mutual fund or Index Funds.

Because that way you won’t have to worry about picking stocks particularly, your Mutual Fund manager will do all the job for you. Moreover, Mutual Funds are not 100% safe. So you have to at least check your portfolio at regular intervals. However, a good mutual fund can save you from a lot of headaches, from picking stocks to selling stocks for profit. 

It’s true that ‘if you want to succeed in life, you have to take risks’. But what’s silent here is “Calculated Risks”. You should only take risk where you can afford to lose. Otherwise, if things go wrong, you’ll be in big trouble. Many people lose all of their wealth just because they tried to satisfy their ego and put their all money at risk. Don’t be that guy. Firstly, know about yourself. How much of a risk-taker are you? And then decide what you should go for.

Conclusion

conclusion

I hope I have helped you by giving you this information. Be smart with your money. First, know about yourself by asking these five questions that I have stated in the beginning. Check yourself; what’s your stand on this. Furthermore, the first rule of investing states that – 

“Invest In Yourself First”. 

Do some research, read blogs on personal finance and investments, arm yourself first with the finance knowledge because that’s where the journey begins. Everyone has a different journey and a different path. So get to know about yourself and start your journey of creating wealth that lasts long for your future generation as well. 

Last but not least, I know you have heard of it many times, but I feel it’s my responsibility to give you this boring but informative disclaimer that “Mutual Fund investments are subject to market risks, read all scheme related documents carefully. “

Do you still feel confused? Don’t worry. We got you! Comment Below, And we will reply to you within 24 hours. You can also shoot us with DM on Instagram @capitalistcabin. We would love to help you.

Happy Investing 🙂 !

2 thoughts on “Trading v/s Investing – What to choose? Free Guide”

  1. Reached here via your Twitter. Loved your article! I’ve been trying to learn and try my hand in investing too. You’re reading blogs, watching videos (quality content only) helps a lot. One thing that bugs me a lot is while talking about investing why is it so necessary to keep retirement in our head? Honestly, I am not even sure if I’ll be even alive by the time I turn 60!

    1. Glad to hear that you liked it Dimple! The thing about retirement is such that everybody plans for future. The compounding of money takes time too.
      About the age of retirement – it’s not mandatory to retire at 60, more and more people are trying to retire early, say 40-45 or even 30!
      But it is also important to live the present to the fullest. It mustn’t be eaten up in planning the future.

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