Trading vs Investing: which is better and which gives higher returns?

A few days ago I met one of my friends Who told me that he traded a little bit of money and made it twice as much I was shocked when I heard this! I thought to myself, is it this simple to increase your money twice or thrice as much? So, even I started to trade And I started my trade with 10,000 Rupees But my trade of 10,000 Rupees, in ten days reduced to become 5,000 Rupees I suffered such a big loss only in ten days What was the reason behind this? Why, during trade, do we lose our money so quickly? Today, we will discuss the difference between investing and trading And how there is more of a chance to lose money while trading And how there are more chances to earn money while investing I, Japgdeep Singh, welcome you to the Groww channel Let us discuss, in this video, the difference between investing and trading And if retail investors like you and me Should trade or invest And in which case are there more chances to make money and in which case can you lose money To start off the video, let us try to understand the difference between investing and trading I will explain it to you with a very simple example Suppose I have some money and I decide to buy an apartment I bought the apartment and in 10-15 days, the value of the apartment doubled, so I sold it I took my profit and left So, this is a case of trading But if I made an investment in an apartment Thinking that in sometime, a highway is going to be built near it Or a metro station is going to be built near it So, when I put in money in the apartment, for a long term, That is called investing Keeping in mind how its value can increase, down the line or in a few years The same thing happens in a share market, take for example that you have put in some money in a share Thinking that in a few days its price is going to increase Without thinking what its business is and how the business can expand in the future Then this is a case of trading But in this case, if you put in your money in a company’s share, By seeing what the company’s financials are, how the company conducts its business What the company’s profits are, how has the company performed in the past few years What the value of the company is, then you are investing Because, at the time of investing if we put in money in any share, The first thing we see is, What is the value of the company? How is the company’s business? Keeping all this in mind when we think of putting in money in a company, Then we react like an investor Now, friends, you have understood what investing and what trading is Who an investor and who a trader is But, just like me, maybe even you don’t know that when we put money in the share market, Do we react like an investor or a trader? Now, I will tell you some traits with which you can figure out whether you are an investor or a trader. The first trait with which we can decide whether we are a trader or an investor Is that whenever you put in money in a share, Do you put in money based on its price or its value? When it comes to price, take for example, there is a share that trades on 100 Rupees It fell to become 60 Rupees Without thinking and knowing it business, you put in money for that share Keeping in mind that the share that was worth 100 rupees is now worth 60 rupees So, I should buy it. In this case, you are trading But if you put in money in a share by looking at its value, Then you’re reacting like an investor The second trait that can help us differentiate Is when you put in money if someone tells you to, then you’re reacting like a trader For example, when I first started putting in money in the share market, Then one of my friends told me to buy a share from some company And I, without thinking or knowing anything about the company and having any information, put in money in that company And in that case, I lost money And its not just me, in this case, many retail investors like me, lose their money When they put in their money in a company without any information, based on what someone says So, if you ever put in money in a company based on what someone says, Then you react like a trader and not an investor So, the first thing an investor would do after hearing about this company, is research about it They would see what kind of work the company does, what product the company makes What raw materials are used to make the product, how the company’s competitive advantage is and what its financials are After that he will decide whether he wants to put in money or not The third trait is that, a trader, before putting in money, sees the technical charts Or believes the news and puts in his money too fast, thinking that very soon its price will go up But, an investor never looks at technical charts He tries to evaluate the intrinsic value of a company What the value of the company is and he tries to gauge the company’s value in different ways And when he understands that the value of the company is good, then he decides to put money in But a trader, on many occasions, based on technical charts and rumours, decides to put money in the share market When the market goes up and down a lot, a trader comes into action He feels that when the market is volatile, he can enter the market and when the price goes slightly higher, he can sell and leave If, in that situation there is a investor, he firstly selects a good company He doesn’t think about the broader market first He selects a good company, reads about its business Then puts money in the company without thinking whether the company is volatile or not Because the market’s volatility makes no difference to him On the other hand, a trader tries to make the most money when the market is volatile Maybe in some cases, some traders come out successful But a lot of trader like you and I, lose their money as well Based on these traits, you can decide whether you are a trader or an investor. I will tell you again in short, If you put in money thinking that you want to earn money very fast, Without having any information about the company and try to take advantage of the market’s volatility, then you react like a trader In the same case, if you are an investor, First, you research about the company, you maintain discipline through the process, You maintain patience for a long term after you invest in the company, And then in the long run, you make good money, then you react like an investor Based on this information, you can decide whether you are an investor or a trader And I will tell you, that you’re a trader then there a big chance of you losing your money But if you are an investor and keep all these things mind, choose a good company for the long run, Then there is a big chance that of you making good money in the end Now, must be thinking, after listening to all this, that you react like an investor But I still lose money So what mistakes am I making, that despite being an investor, I lose all my money The biggest mistake we make as investors, is that we don’t diversify our portfolios While investing, we choose a good stock and invest a lot of money in it And many a times, retail investors like you and I, we make a lot of mistakes Because our research isn’t necessarily always right And what happens in that case is that, all our money is invested in one company When that company declines, we face a big loss And because of this, many investors undergo a big loss So, to avoid this loss and to rectify our mistake, We should invest our money in different companies We should diversify our portfolio The main benefit of diversifying, is that our risk becomes lesser Our risks diversify Because of which if one company goes down, then we can get a profit form other companies And our loss is not as much So, if you are investor the first thing you should keep in mind is that you have to diversify your portfolio Second, we should not get very emotionally attached to any company You should always remember that if you have invested in any company, Then your hard earned money has been put into that company If that company does not perform well, or continues to decline Then you should exit from that company at the right time Take for example, that you bought a share from a company at 100 Rupees And an issue of corporate governance comes up in the company, because of which its share price come to 60 Rupees You realize that something is going wrong in the company and that it’s the time to exit from the company But retail investors like you and I, get very emotionally attached to a company And we like to believe that the company will bounce back and the price of the share will go back to 100 or 120 The mistake we make is that, in that situation, we invest more money Because of which, the other stocks we have in our portfolio In which we should invest money, we remove money from that and invest it in the former company Even when we know that the company is not going to perform well And all our money is gone and as an investor, we lose all our money Making mistakes during research is not made just by retail investors like us But also by big investors like Rakesh Jhunjhunwala who also invested a lot of money in DHFL And when the shares came down, he bought more So, mistakes are made by everyone But it is important that we rectify our mistakes at the right time And exit the stock at the time when we know that its not going to perform well in the coming time So, until now, I have told you what the difference between trading and investing is How you can decide whether you are a trader or an investor And how by being an investor, you can make correct strategies to earn the most money Now, I will tell you what is right for you between trading and investing I will not say that trading is wrong and you can never earn money by trading It is possible to earn money by trading. But for retail investors like you an I, it is extremely difficult Because during trading, the opposite party, is a lot more qualified than us And when retail investors like you and I, start to trade, the counter parties are very big companies They put in a lot of strategies behind every trade which we don’t know about So, I will not say that trading is very wrong But the knowledge, information and the system required for trading, retail investors don’t have So, for retail investors, the safest and best way to earn money is through investing Because the benefit of investing is that whichever company you’re investing in, its for a long time And if the company performs well in the future, then the share price will go up With which you can benefit Apart from this, if you invest for a long time, then are is a big chance that if the company performs well, they will give you a dividend So, there are a lot of ways through which you can get an income Because of which the chances of you going through a loss become a lot lesser This is why I say that trading and investing are both good But for retail investors like you and I, who are just starting to invest, Who are thinking to put money in the share market Investing is very useful and simple for them And they have lesser chances of losing money and more chances of making money So, I will end this video with a very interesting fact You must have heard the names of some very big investors like Warren Buffett, Rakesh Jhunjhunwala And many others, but you would’ve heard very less names of successful traders Because trading is very difficult and complex And people like you and I making money off trading happens very rarely And people like us often get greedy that we’d be able to make money off trading But, we lose money again And our belief in the share market is lost and we exit it You must be thinking that should start investing now That you want to learn how to see a financial statement So, we had made a video on how you can see a financial statement There’s a link down below to the video where we tell you how you can read the financial statement of any company We make 3-4 videos every week on financial knowledge on this channel So that you can become a good and intelligent investor So, if you haven’t yet subscribed to this channel, please subscribe so that you don’t miss out on that financial knowledge So, friends, if you liked this video, press that like button Comment down below and let us know whether you are a trader or an investor And if you are an investor, which companies have you invested in So that our other viewers can also learn from you Because from your recommendation, a good company has come up, which other people can also invest in. Happy investing!

100 Replies to “Trading vs Investing: which is better and which gives higher returns?

  1. Sir mrko… Groww ki traf se mail aaya kii apko surprise Dena chahte Hain hum ap address fill kriye and all…

    So sir ye sahi hai kii kuch naa kuch mere address pe courier hoga??

  2. Sir please a video on money management , risk analysis, RSI, moving average , how to select right share , quantity of share , risk and reward

  3. Honest management Indian company me dhoondana aur govt. K anap sanap policy se bachana aur yesey halat me share market me Paisa kewal traders hi Paisa banata hai… Investers to kisi v halat me Paisa loose hi karata hai…

  4. Maine last tym infosys share 650 tak gir gaya ta na us vakth mai 100 quantity buy karke raka hoon ,cnc , its price may increase in the future…

  5. I lost more than 2.5 lakhs doing trading, I advice all the new comers not to trade. And concentrate more on investing and learn about it.
    Even if you want to trade, do after you get some experience in share market and that too in small quantities.
    Don't be greedy !!

  6. Than why there is many traders who have created huge amounts.. Hope trading is also an art and it require proper skills.
    Of course investment is completely different from trading.

  7. I want to be a investor… But I always found difficult to exit from the invested stock whenever a bad situation arises.. I don't actually know if I have to book profit or stay invested and see the stock falling to my purchased price or even below. A crux for me….

  8. The video on the analysis of stock was very useful. It would be even more helpful if you could make the same by using an example. Also please make a video on how to value a company.

  9. Hello Mr. Jagdeep Sing . . . This is ANSAR from Kuwait . . . I'm a long term Investor . . . . I'm invested in Mutual Funds . . .

  10. Reliance industries
    Hdfc amc
    Hdfc bank
    Info edge(naukri)
    Bajaj finance
    Motherson Sumi
    Icici Prudential life insurance

  11. You are just against trading. If we're good at technical analysis then we're right 7/10 or 8/10 times and most of the professional traders end up making money more often than not.
    But it isn't advisable for beginners, ofc.

  12. Sir Mera request Hain ki Maine kotak infrastructure me 1000/- invest Karratha magar cancel button dabke transection failed huva magar Mera account se money deduct huva 07/11/2019 ko abhi thak money reverse nahi huva customer care number bhi nahi lagrahai

  13. I apply for IRCTC IPO but i don't get it , after listening IRCTC share price i feel so sad share price 610 but i never purchase at that time
    If i purchase that time i feel very good
    this time now share price 940

  14. Sir I have invested in reliance, hul, itc, fortis health, kec int, mothersun sumi, bata, hdfc, sbi Sci. My time horizon is 4 to 5 year. Are these stocks are perfect?

  15. No wonder you will discourage trading due to your bussiness which is inveating centric 😎 but let me ask you a simple question..
    How much have investors in small and midcaps got rewarded in past two years?
    Meanwhile great traders have earned so much during this downfall of small and midcaps!!

  16. Sir, basically I am an investor and having a considerable holdings but due to pursuation of some free tips I also started trading but resultant is zero and I lost considerable amount. But I have taken pledge that I will never ever trade henceforth. Awesome teaching !! Thanks a lot.

  17. RIL
    HDFC bank
    IRCTC (multi bagger)
    HDFC AMC (multi bagger)
    HDFC life
    Lal path Lab
    Jubilant Food
    KPR Mill
    Black Rose Industries (Multi bagger)
    Affle India
    Indiamart intermesh

    Some are short term
    Most of are long term (10years)
    & few are life time

  18. I’m investor. I invest mostly in banks HDFC, ICICI & SBI are my primary stocks 43% 30% 27% respectively. By the way I also invest in other sectors like IT, Govt. bonds and much more.

  19. It's always good to learn something new.. For me I invest in fundamental sound companies using technical analysis as it helps me identify when is the best time to enter.. Or exit.. Fundamental analysis is late in predicting the onset of bear market or beginning of bull market..
    Fundamentals are reflected in the market price which is the technical analysis..
    To be a successful investor..both fundamentals and technical knowledge can complement each other deficiencies.

  20. Great video, but would like to share my point of view here. I mostly trade Nifty 50 companies and invest in other less known large and midcap companies by doing fundamental analysis. Some tips from my side for new investor :
    1. Learn DCF model of valuation. And find the valuation of top 50 companies. If you are a beginner don't try to analyse banks and nbfc companies.
    2. Learn technical analysis from a professional trader
    Now apply this on nifty 50 companies. Strongly maintain your stoploss. Before applying technical analysis, check the valuation using dcf method. Those who don't know DCF valuation model, go to & can use their fair value for reference.

  21. Sir You have done CFA 2 Cleared and you said Stock trade is risky. Sorry I am not agree with you topic I know investment is best source of Income but If you are holding a Stock is also has Double Risk

  22. You guys not at all doing english videos now , even stopped subtitles. Really want to listen to these topics ! But could not understand ! 😀 . Please do something for English viewers . And I couldn’t find a good English channel on indian Market nd investments

  23. Icici Prudential balance fund kaisa fund hain.2 saal se lumpsump Kia hoon 5lakhs.only 7 percent.hold karuna ya exit karu samaj main nahi ata hain.sir please suggest

  24. Sir aapki knowledge incomplete hai… Aapke baat se samajh aa gya aap avi new ho..
    Investors fundamentals dekhte hai but final decision charts k basis pr he lete hai… Kuki ek chart jb bannta hai tb wo ek smart money k movement se bnnta hai… Fundamentals chart k uss movement me aa jate hai.
    I hope u can understand.

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