Distinction Between Trading and Investing

Actual Question:

What’s the difference between stock trading, investing and real estate?

Answer:

The dictionary meaning of the word ‘Investing’ is putting money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit. Further drilling down reveals a few other aspects like period of holding, safety of principal, regularity, and so on.

Picture depicts investor walking to the stock broker to purchase shares

‘Stock Trading’ is buying shares or sticks with an intention of profiting from the price fluctuations on the stock market. Stock trading is a speculative activity and does not fit into the definition of investing.

Picture shows a trader sitting before the computer trading in stocks

Real estate investment qualifies as investment though it has some fundamental drawbacks.

Following table brings out the differences among the three:

	Sl. No.	Aspect	Share Trading	Investing (Shares)	Real Estate
	1	Recurring income from the same investment	✖	✔	✔
	2	Capital Appreciation	✔	✔	✔
	3	Liquidity	✔	✔	✖
	4	Can invest small sums?	✔	✔	✖
	5	Intended Period of holding	Short	Long	Long
	6	Safety of Principal	✖	✔	✔

Related:

• Investing
• Trading/ Day Trading
• Margin Trading