Difference between Stock Trading and Stock Investment
In the world of stocks there are so many terms that may still not be better understood by the general public. So, beginner investors should be diligent to learn and find as much information as possible before starting to invest. One of the most common terms found at the beginning of stock saving is the term stock investment and stock trading. What is the meaning of stock investing and stock trading? And what's the difference between the two? Let's read it together below.
What are stocks?
Before we go deeper into understanding the meaning of stock investing as well as stock trading, let's start from understanding the stock itself first. Shares are evidence of ownership of a company that is a claim to the company's income and wealth. That means when you buy a stock, so automatically you are one of the owners of the company, and you will also get a break that will occur from the company.
What is a stock investment?
So, stock investment can be interpreted as the activity of investing in companies that have been listed on the Indonesia Stock Exchange and selling their shares. Investment is passive. That is, you as an investor do not run the personal struggle, you only invest some funds to then be managed by the company concerned.
Similar to doing business, not only able to benefit, investing in stocks is also able to not convey the function for you. Therefore, it is important to recognize and know the info of the company in your area of investing before you decide to invest. Because by managing risk factors well, you will have a greater chance to be able to get the function of your investment.
What is Stock Trading?
Stock trading has the understanding as an activity to buy and sell stocks by utilizing market price fluctuations every day. If in stock investments you are more passive, in stock trading you will be more active. This is because as a stock trader, you will convey the time to analyze the market and decide the best time and price to make stock transactions.
That way, you can get the best capital gain from the price difference that occurs when you buy shares and when you sell them.
Difference in Stock Investment and Stock Trading
For more details, the following will be explained what are the things that distinguish stock investment and stock trading:
Principle: Buy and Hold vs Buy and Sell
A stock investor tends to hold the principle of buy and hold when making stock investments. This happens because usually a stock investor invests his capital for a long-term agenda.
So, stock investors tend not to care too much about the rise and fall of stock prices per day. The time period is uncertain, it all depends on each investor. However, usually an investor will sell his shares when his investment goals have been met.
Meanwhile, a stock trader holds the principle of buy and sell. Traders will buy shares at a certain price, and will sell them in a fairly short period of time as long as the quality of the stock has been within the range expected by the trader. Traders usually want a higher function than passing a regular investment.
Fundamental Analysis vs Technical Analysis
Because a stock investor tends to invest in the long term, so the analysis used by an investor is a fundamental analysis of the company.
Company fundamentals are basic and important information about the company such as the company's financial statements, the company's performance, the pace of development of its shares in a certain period of time, and others that can be used as a reference in assessing the company's ability to manage its business.
Investing in a company with good fundamentals will reduce the risk of loss for its investors.
Meanwhile, stock traders usually do more technical analysis. This analysis can help traders watch the movement of stocks in the short term.
This is because trading is more sensitive to market sentiment and market conditions than the company's fundamentals. Therefore, the analysis carried out must be more thorough and detailed on all risk factors.
Risk
The next difference is risk. When looking at the risk of both, so the risk in investing in stocks is much lower when compared to stock trading. Because the risk is lower, so what will happen that will happen tends to be lower when compared to stock trading.
Stock investors tend to be more selective in choosing companies that will get their investments, usually investors prefer blue chip companies that have proven to be popular and proven to have good fundamentals.
Meanwhile, stock traders tend to have higher risk, traders usually choose third-class stocks aka stocks that are newly listed on the stock exchange. Traders choose these companies because the stock price tends to be more affordable than blue chip stocks but has the potential to experience high fluctuations depending on market sentiment.
That way, the hope is that traders can buy shares in large quantities and sell them when the stock has increased significantly.
The above are some of the factors that distinguish between stock investing and stock trading. Now as a beginner in the stock market you are able to determine which one is most appropriate for you.
One of the rules in the world of stocks is high risk high return, continues to be high risk that you dare to face, so it will continue to be high also the probability of functions that you will get. Now, by choosing the right securities, you will get a lot of help in managing the risks you will take.
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