Investing involves the allocation of resources such as time or money into something (e.g. a business, asset or item) with the expectation that it will deliver a positive return in the form of profit or income over time.
Trading involves buying and selling things—such as currencies, stocks, indexes and commodities—with the expectation of profiting from doing so.
Factors to consider when deciding which is right for you:
- Time availability and commitment: While investors will commit significant time towards researching prospective investments and monitoring existing ones, for the most part, the overall commitment of time is low in comparison to traders.
- Personal psychology and risk tolerance: Traders are often far more tolerant of risk than investors as they have to manage many layers of risk with every trade.
- Skill: Trading and investing require some skill in analysing trade or investment opportunities, but trading also demands strong skills in technical analysis.
When assessing whether trading or investing is right for you, you should appraise your skills and abilities alongside your level of commitment, available time and goals.