Why Trading Stock is Not Investing
What is Stock Trading Then

Trading Stock is Not Investing
Stock Trading is About Business Than Investing

Robert Kiyosaki defined investment as something that you can continuously making money even if you fall asleep. To me, this holds true for stock investing as well.

Invest in stock is about making money from the day you own the stock till the time you sell the holdings. You’ll be getting additional cash flow from dividends or right issues.

Besides, dividends will grow if the company able to issue bonuses. In addition, the portfolio should grow as expected as you hold the stocks.

Stock investing should be about buy-and-hold strategy then.

Is that mean, I cannot sell the stock? Of course not!

In fact, you should sell them off if there are fundamental changes. For example, you should sell if the stock has different business model, change in management personnel or different business direction. The reason is, historical stock performance is no more relevant to forecast future potential with all the changes in place.

Make sense?

However, you can still hold or buy the stocks if you have 100 per cent confidence that the changes will bring in more profits. You might aware the new CEO is more competent, the new business model can be the new way of doing things or the new direction is the way to go in current economic condition. It is up to you to assess the risk.

On the other hand, you can sell the stock for personal reasons as well. Although the stocks have no change at all, you might find other better opportunities that worth investing now than later. It doesn’t have to be a rocket science calculation to sell stocks that only giving 10 per cent return with another one with 30 per cent return potential.

Another personal reason would be about achieving financial goal already. Some investors are buying stocks for retirement. From calculation, they can get $10 million dollar after 30 years investing in particular stocks and that is good enough to retire comfortably. So, when the time comes (after 30 years) they can sell the stocks to reap the profits.

What about trading stock?

Trading stock is about doing another job. Unlike stock investing, you can’t get anything if you don’t trade every now and then. Your profits and return is depends on how profitable your trade is in either short term, medium term or long term period. It can be mechanical trading, swing trading, day trading or trend trading. To make it very successful, stock trading software is crucial to help you identify which trend is profitable.

Besides that, stock trading allows you to trade on margin as long as the interest rate is considered lower than the possible profits. Btw, trade on margin is about borrowing money to trade stock. Although many warn investors not to borrow money to make money in stock market, to me, trade on margin is possible. Your return is infinity (mathematically, infinity is when something divide by nothing) if you able to make money without having any money.

Can you imagine how much more money are you going to make?

It is just like a good debt and bad debt.

A good debt is about borrowing money to get more money and vice versa. However, this financial leverage is a double edge sword. You will be making much money out of nothing if you use it the right way but you can go broke if you are not competent enough in managing the risk.

Therefore, trading stock is a business, not just investing.
Where you can buy and sleep on the stock forever.

In stock trading, you need to have sufficient capital (either through trust fund, borrowings, or your own savings), stock trading tools, stock trading software and time commitment. Although there is no guarantee of success, you can reduce risk of losing money by having them.

However, you can trade stock while investing too. Find out how.

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