Value-based investment and trading on shares are two different art of making profits. The art differs in the mode of operation and the perspective towards stakes and financial outcomes.
Focusing on the trends and buying shares in one way, keeping away from the trends, and investing in equal proportions in various claims is another way. The parallel methodology intersects only one point in time: while buying the shares.
The financial goal is to watch out for the potential rise in the value of the shares. Keeping it long-term or selling the shares at the right time fetches equally good financial returns.
It all depends on how a person looks at investing and buying shares. They both are similar in purchasing stock, but the aftermath is different.
Wealth creation in the equity market revolves around these two actions. The approaches are quite different, but the objective is the same, financial freedom.
Is it quick money? or does long-term nurture make much difference? The differences in approach lie in the methodology of operation and strategies used to think about the following action plan.
Key Takeaways
- Investing is allocating money or resources to an asset or venture with the expectation of generating returns or income. Buying shares is a specific form of investment where an individual or entity purchases ownership stakes in a publicly traded company.
- Investments, such as real estate, bonds, or mutual funds, can take various forms. Still, buying shares involves purchasing a portion of a companyโs equity, giving the investor ownership rights and potential dividends.
- Both investing and buying shares aim to grow wealth, but investing encompasses a broader range of asset classes and strategies.
Investing vs Buying Shares
The difference between investing and buying shares is that Investing happens after thorough market research of the movement of the share
in the past, the companyโs track record, and buying the shares stocking it for a more extended period aiming at higher financial benefits later. Buying shares is a simple activity to watch out for the trend, look out for the stable companyโs share price, and purchase it, to keep it for a relatively shorter period.
Comparison Table
| Parameter of Comparison | Investing | Buying Shares |
|---|---|---|
| Meaning/Definition | Investing is buying shares and stocking them for a more extended period aiming at higher returns at a later point in time. | Buying shares is a simple share purchase activity when the price goes down to sell it once it goes up. |
| Goal | Investing steadily builds wealth over time by buying and holding shares for extended periods. | The goal is to purchase stock at a lower price to sell it at a higher price later for short-term gains. |
| Belief System | The company will perform to its best in the future, and the returns can be received as dividends. | The shares shall move up in price in the next few days. |
| Profit and Period | The profits are reinvested in shares to make additional stocks. Generally, the period of holding the stocks is more extended. | The profit is made by purchasing the shares at a low price and simultaneously selling at a higher price at a tight time. The period of hold is minimal. |
| Strategy and Tools used | The strategy is, buy to hold. Market forecasts are learned systematically, and continuous watch on the price and earnings ratio establishes success. | The strategy is to buy to sell. The sharesโ technical analysis is like moving averages and watching out for oscillators to identify the right time to purchase or sell shares. |
What is Investment?
Investing is a financial strategy to buy and hold shares for a more extended period to earn interest and reinvest in additional stocks.
In the long run, market movement and participation are how the investors look for profit; investing makes more enormous profits over time through buying and holding.
Investment is a long-term approach that requires a thorough market analysis of the companyโs trend. Investors easily ride out short-term losses and aim at holding for a more extended period for high returns.
The primary objective of investing is to gradually build wealth over time by holding a portfolio of stocks, investment bonds, mutual funds, and baskets of stocks. Investments naturally extend over a decade aiming at the interest received as dividends later.ย
Investors do not worry about market fluctuations. They carefully watch for the price-earnings ratio and market fundamentals.
Investors look at creating steady wealth by gradually investing and reinvesting in the stocks, so the market fluctuations do not matter to them when there is consistent wealth development.
This involves very low-risk factors, and the annual interest earned is nearly 15%. This is way too higher than the traders who make a monthly turnover of 10%.
The art of compounding interest comes to rescue long-term investments. It is not only higher in returns but also secured.
What is Buying of Shares?
It is a simple activity of purchasing the shares while the prices are down. The main aim of buying the claims is to wait for the right time to sell the same when the prices go high.
The process of buying shares is done regularly. The main objective is to profit in the short term, and no investment thoughts arise.
While investing in shares gives high returns in the long run, buying and selling shares at the right time also offers good returns.
The technical analysis of stocks is to be watched out for. This lets the buyer ascertain which shares he will buy for that period.
The oscillations and share movements are the right moments to approach a purchase. Market fluctuations are the ripe moments for buyers.
The belief the buyers have is that the price of the share shall rise in the future. And once it does, sell the stock to purchase new ones at a lower price.
Generally, buying shares is an activity that does not intend to hold the shares. Purchasing and keeping the shares for a shorter period can offer them a return of 10% every month.
Main Differences Between Investing and Buying Shares
- Theย main difference between investing and buying sharesย is that investing in shares happens after thorough market research of the movement of the shares in the past, the companyโs track record, and buying the shares stocking it for a more extended period aiming at higher financial benefits later. Buying shares is a simple activity to watch out for the trend, look out for the stable companyโs share price, and purchase it, to keep it for a relatively shorter period.
- The investorโs goal is to consistently develop wealth through careful investment and reinvestment in the shares. Buying shares means waiting until the share price goes high so it can be sold.
- The general belief the investors have is the Company shall perform well in the more extended period, which may offer returns as dividends. At the same time, the buyer shall believe in the market movement and share price hike.
- Generally, investments are like retirement plans, it goes for decades, and the profit is reinvested in getting additional stocks. Buying shares shall ensure profit when sold at a higher price; typically, these are short-term affairs.
- The strategy of investing is to buy to hold, while the strategy of buying is to buy to sell.
- https://ideas.repec.org/a/fip/fedaer/y1995ijanp1-12nv.80no.1.html
- https://www.clutejournals.com/index.php/IBER/article/view/4226
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
