There are two main approaches to buying and selling shares of listed companies: investing and trading. Before choosing the right approach, it's important to recognize the differences between the two.
| Investing | Trading |
Actors | Called "investors". | Called "traders". |
Principle | Buy & hold, investors buy shares and hold them in the long term. | Buy & sell, traders actively trade stocks, aka buying and selling in the short term. |
Profit | Earned from capital gains as well as dividends that shared by the company over a period of time. | Only earned from capital gains, aka the difference in the price of buying and selling shares. |
Goals | Long-term financial goals: buying a house, setting up a child's education fund, and achieving financial freedom. | Short-term financial goals: buying a new gadget or going on a vacation. |
Risk | Tends to be lower as investors choose blue chip stocks with stable price increases. | Tends to be higher as traders choose second- or third-tier stocks with volatile prices in order to make a large buying and selling difference. |
Analysis | Investors use fundamental analysis to determine which stocks to buy. Technical analysis is also required to determine when to buy or sell a stock. | Traders only use technical analysis. |
Asset Protection Element | Investments generally have no asset protection element because investors do not have to worry about price declines. | The asset protection elements of trading are stop loss and take profit when the stock price reaches certain minimum or maximum limits. |
While there are a number of differences between stock investing and trading, both have the same main goal: Making a profit. Either way, KAF ETRADE can be your mainstay in building your portfolio strategy.
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Disclaimer: The content is made for educational purposes, not a recommendation to buy or sell a particular stock. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (OJK).
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