Now' we are excited to continue our series on stock market basic info for beginners.
Today, we'll discuss some key pros and cons of investing and trading. Which help you to understand advantages and disadvantage of each financial path .
This post will also helps you to bust myths and clearer your thinking perspective towards this two financial path .
So let's start with investing pros and cons.
∆ Pros.
Making wealth overtime.
In investing, allocating money to stock, real estate or mutual fund for long term can help investors build significant wealth over time.
Passive income.
investing in stocks, bonds, real estate or mutual fund etc can generate a recurring nature of income but it's depends on the type of investment we are doing.
Lower risk.
Compared to trading investing have lower risk because of long term investment approach.
Tax benefits.
Compared to trading investing has to pay lower amount of taxes due to long-term nature of investment .
Convenience .
Investing requires less time to monitor the market actions compared to trading .
∆ cons.
Slower return.
Buliding wealth through investing takes time, it can take many years or even decades to .
Market volatility.
Some time in long-term investment market goes up and down. This type of market behaviour check the patience of investors, some investors lose patience and some not but it's all depends on their research & analytics , but still it is not granted that if investors face the fluctuations with the patience you get profit and same for loss to.
Inflation risk.
In investment, inflation doesn't affect directly, but it impact on our investment return value. when the value of money decrease due to inflation, then the real value of our investment also decrease.
Knowledge requirements.
Without knowledge doing investment is just like closing eyes while driving . It means need of knowledge is necessary in investment , trading to.
Liquidity.
In investment, lack of liquidity may couse some problem because you may not always able to sell at value you want.
Now, let see trading pros and cons.
∆ Pros.
Quick profits.
Trading give you quick benefits because of its short- term trading strategy. It focuses on small profit.
High liquidity.
It's mean that, campard to investing. In trading liquidity is too higher, so traders can easily buy or sell any financial instrument like stocks, bonds & mutual fund etc.
Lot's of strategies.
In trading, there are lots of strategies which trader use.These strategies are mainly based on time periods.
Control over investment.
In trading, traders always have control on their actions. In this they decide when they have to enter and exit a trad. Traders have full authority on their investment.
Educational growth.
In trading , trader always learn something new from market, that why educational growth is necessary.
∆ cons.
High risk.
Trading looks like money making machine, but it also includes high risk of losing money because of unpredictable nature. for handling this, traders always have to ready with proper risk management strategies for minimize looses.
Emotional stress.
Trading can cause a lots of emotional stress because of its unpredictable nature ,traders always feer to loos their money and also aim to gain more and more profit because of theirs greed. That's why trading impact on emotional stress.
Costs and fees.
Trading involves various types of cost and fees, like broker fees , taxes, transaction charges,and sometimes platform subscription costs.this all expenses part of your trading journey.
Time consuming.
Compared to investing trading needs lots of time to monitor it and if you're a day trader like Intraday trader or scalper, then you need to pay full attention on your trads
Knowledge requirements.
Trading is not gambling, it is totally based on knowledge and experience, however for beginner lack of knowledge is biggest problem which make trading risky for beginners. Learning the basics and gaining experience is very important before starting.
This are some key pros and cons of investing and trading .
Conclusion.
If you are totally beginners then learn it and then do .
Or if you have knowledge but do not have funds then do some side work and earn something and then start this.
I think everyone atlist try this two financial path ones in their life.
For more information about stock market only for beginners click here.