Investing or Trading – Which is More Likely to Be a Stepping Stone to Financial Freedom?
People tend to use the terms ‘investing’ and ‘trading’ almost interchangeably at times – but they actually describe two entirely different approaches.
When you ‘invest’ in stocks, real estate, or bonds you’re looking at the long term financial gain in doing so. On the other hand when you ‘trade’ in stocks, currencies, commodities or financial derivatives, you’re looking to make a quick profit from a short term shift in its price.
Different Types of Risk
Both investing and trading can help you to better yourself financially – but both also come with risks.
Investing is a bit of a mixed basket as far as risk is concerned. While there are certainly some types of investment that are high risk, there are also those that are extremely low risk but also come with low returns.
On the other hand, trading generally has a more readily apparent type of risk, though it too can vary quite a bit depending on the market. In general however, trading exposes you to more frequent market fluctuations – which makes the risk factor higher, and the potential returns higher as well.
Financial Freedom is About What Works for You
So which one is more likely to be a stepping stone to help you achieve final freedom? Honestly – that entirely depends on what works for you.
If you are going to invest then you need to be able to identify equity, property, or bonds that can generate long term profits and diversify your investments so that they are safe. On the other hand if you are going to trade you need to identify potential avenues where you can make a profit in the short term, and continue to do so constantly while monitoring the market conditions.
In short, investing generally involves more upfront work – but once you have invested there’s less maintenance involved. On the other hand trading is a constant flurry of activity on a day to day basis.
As such the question that you should be asking yourself is: Which of the two is more suitable for you? Do you have the time to monitor market conditions and trade daily? Do you have the patience and capital to invest for the long term?
Investing for the Long-Term, Trading for the Short-Term
Another way of looking at it is whether you’re thinking about your long-term financial freedom and planning for your retirement, or whether you want to be able to make a stable income in the short term.
In the case of the former, investing is a safer and more reliable way to ensure you have enough cash and assets to retire comfortably. That being said in the case of the latter, trading is a better option.
To try your hand trading, just visit ETX Capital. It is a platform that will let you trade on various markets and will give you a feel for what you can expect – assuming you choose to go down that route.