Stock markets are volatile and at times they become resilient. All profits accumulated over years can be wiped out in days or weeks. Many new entrants in the market get worried when they see their hard earned money turning into losses. Even a lot of investors who are in market for quite some time start selling, taking wrong strategies as they wanted to cut their further losses or protect their capital. Some people try to console themselves and say we are investors for long term. They do not mean it but as they are trapped they have no choice other than turning investor from traders. All should venture into the game after understanding the risk in equity market, we must have clear vision and discipline for investment. Be clear what your investment objective is and stick to tough times for bigger gains. Understand below the difference between trader & investor.
| Trader | Investor |
| Does not invest for a time horizon. They look for opportunities / speculation. | Puts in money for a defined period. It can be minimum 2/3 years or more. |
| They invest for short term. | They invest for long term. |
| Only goal is to get returns/ profits from investment. Time frame is today or a week. They may have long term goals also but need quick money. | Have a goal in mind for which they need to grow money. Such as education, house buying, marriage, travel worldwide, retirement, wealth building as we earn more and have surplus. |
| Watch the market every day, every second type. They do a lot of research, keep their eyes and ears open for all data/news and act quickly on the tips. | Do not watch the market movements daily. Do not act on tips/news. |
| They book profits when required, exit markets when they feel, incur losses as well. Ready to take square off at any time. | Do not get worried on market fluctuations as they know that they need corpus after certain time. |
| Tracks profit/loss/margin/brokerage daily. | They track returns periodically (quarterly/half yearly/annually). |
| No time frame of investment. Every day is a good day to make money. How much return they do not know, its dynamic | Like you invest in fixed income instruments such as Fixed Deposits for 1/2/3/5 years, investors also give time to their equity to grow. Investors have in mind a specific return range. |
| All types of stocks. News/analysis/results play a key role for traders to decide the stocks. | Good stock selection & Patience are key success reasons for investors. |
| They use market down turn as opportunity at time and also may lose money in downturn. Power of compounding does not work here. | They use market down turn as opportunity and make full use of compounding power. |
| Takes high risk. Invests large amount at a time for margin. | Takes calculated risk. Invests defined amount or surplus funds. |
We are not saying you should be an investor and not a trader. Your end objective should be to make money without confusion. A lot of traders are successful in meeting their objective but they take the risk, they are mentally prepared for profits as well as losses. Traders do a lot of research/ reading/ data analysis and also devote their time daily. Traders work on strategies of their own and also have discipline of working in stock market.
So, do not be in dilemma. Decide today what you are or what you want to be and keep focus on your equity investment strategy.
