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Trading vs. Investing

I’m an investor, which means that I invest my money┬áin the stock market for the long-haul and don’t really care about the short-term fluctuations in the market. I lose no sleep if there is a crash and actually feel quite happy because I can pick up stocks that I want cheaply.

Trading, on the other hand is for the purpose of making money off the fluctuations in the market. You can make money when the market is going up by “going long” or you can make money on a downturn by shorting stocks. There are other things you can use too like options. But, let me just caution you: things like options and shorting are for advanced investors and it’s not something I’d use, at least at this point in time because I am definitely not knowledge enough. And I’ve done thousands of hours of research about investing.

So what do I advocate? Investing of course. Historically, the stock market always goes up, if you look at long enough periods. There’s no reason not to think the same won’t happen in the future. Companies will keep increasing their earnings and paying out dividends. Sure, some companies will go bust, but hopefully you had enough foresight to avoid them.

Trading is dangerous unless you really know what you’re doing. How many day-tradersdo you know that are successful? Probably none. How many investors do you know that are millionaires or will become one, given 20 or 30 years? Probably plenty. Slow and steady wins the race. Don’t get sucked into the hype of someone making thousands of dollars in a day by using a certain program, chances are they’re going to lose it soon enough too! Talk to them in a year and see how things are then.

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