trading vs investing.Which one is better

When you enter the world of the stock market you will see three types of people one is investor, second is trader and third spectator. Spectator just watches the stock market. Traders and investors have only one motive in mind i.e to earn money from the stock market but the way they both try to earn money is quite different.
Traders try to take profit in the short term which is either weeks, days, hours and even minutes whereas investors try to take profit in the long term. In this article, we will discuss what traders and investors try to see for making a profit in the stock market and compare both of them.

TRADING: Traders watches the chart and apply various indicators to know when to enter the trade and when to exit the trade. They are not concerned about the management of the company or financial statements of the company. Traders plays with the sentiments of the market and book their profit. The person who wants to be trader should keep in mind that trading does not always go as they thought, they might get loss so they must know how much loss they can bear and should exit the trade no matter what. They should come with a game plan to know about everything they are looking for trade. Emotion is something which should not come while trading.

    

INVESTING: Investors investing for long terms are concerned about the company management, market share, financial statements etc. They look for companies that are below their present value. They try to find the real value of the company and its worth in future using various techniques and formulas. One of the technique is the dividend discount model. Investors are least concerned about the short term analysis and what is happening to the price of the stock in the short term.  Investors look for the time value of the money. The person who wants to become an investor must learn how to read financial statements and how to know about the management. If you don’t do the analysis correctly then you can lose your money in the long term so it’s important to do the analysis correctly.

CONCLUSION:

Even though trading and investing are quite different in terms of timing and tools we use. It is quite hard to choose which one is better as in the real world both of them have shown results. One thing that one can say is that it is always good to use them both as you will then get the upper hand. In technical analysis traders sometimes use financial ratios and also analyses the company for making their strategy. Sometimes investors see that they can book short term profit based on technical analysis. 

Hope you like the article. Comment below about what you think is better trading and investing. Which one will you choose?.

FEW STEPS FOR SELECTING MUTUALFUNDS

In present scenario more and more people want to invest in mutual funds as the return on saving accounts and FDs are not so high.It's one of common term that mutual funds are subject to market risk.People are ready to take that risk and want to invest but the problem lies when they want to decide which mutual funds to take and which not to take as there are thousands of mutual funds available.

In rest of the article there are few things which one must keep in mind while investing in mutual funds.

1 EXISTENCE : It's better for new investors to invest in mutual funds that already exist in the market.The reason for that is it is easy to track the past records of the funds that already exist in the market then the funds which are new to the market so one can track the records and then think whether to invest or not.

2 MUTUAL FUND SCHEME : After knowing the existence next step is to select the mutual fund sceheme which suits best for you and the type of mutual fund which suits best for you.It's one of the crucial step as it decides how risky your fund could be and how much return it can generate. You can read my article about the schemes  and about types .

3 Portfolio : After choosing the scheme check what is the portfolio of the mutual fund.Portfolio tells you about the places where your money is going to be invested and how much percentage of the money is invested where.

4 FUND MANAGER : Fund manager is one who will handle the mutual fund portfolio and invest according to the scheme of the mutual fund.The next step is to know who is the fund manager of the scheme and the background of fund manager and also the previous performance.This will help you knowing how your fund will be handled.

5 WHICH PLAN TO CHOOSE : Next step is to choose whether you want to select direct plan or regular plan.Direct plan is the one in which there is no agent and you invest directly with the mutual fund company whereas regular plan is the one in which you invest through agent.Most of the investment is made through regular plan,however it's better to go for direct plan as there is no commission of the agent which will help you generating more return in future.

6 ENTRY AND EXIT LOAD : Entry load is the charge which one has to pay while entering the mutual fund.Entry load basically reduces the investors investment.Exit load is the charge which one has to pay while leaving the scheme.The reason for entry load is to cover all the costs,whereas exit load is to reduce number of withdrawals.Different mutual funds charges different exit loads.

7 EXPENSE RATIO : Not all mutual funds charges entry and exit load but expense ratio is charged by every fund.This is the charge which one has to pay for the management of mutual fund scheme.It is calculated by dividing total expense incurred in the management of scheme by the total Asset Under Management.

These are few steps which one must follow for getting the in-depth knowledge of fund one want to invest in and selecting the fund.

Hope you find this article useful.Please comment how you find this article and share with your friends. Thank you!!