Investing and Trading- What Is The Difference?
Many people use the words "trading" and "investing" interchangeably when, in reality, they are two fundamentally different activities and you need to understand the difference to create wealth.
Watch the video to get clarity on:
- The difference between investing and trading;
- The distinctive elements to know which is which; and
- How you use BOTH to grow your wealth in very different ways and for different purposes to create your freedom.
Understanding the difference is so important and many people get this confused and end up never creating real sustainable wealth or achieving financial freedom as a result.
Remember, Financial Freedom is where you have assets that grow in value and earn you income so you no longer have to be work if you don’t want to. Your assets pay for your lifestyle - not you.
You are Financially Free when you no longer have to work for money. That’s the goal!
What is Trading?
Simply put, trading is when there's an activity involving YOU in creating money.
Take for example forex trading, currency trading or options trading - the clue is in the word.
The word trading means that there is a buy and sell exchange in order to create money, Or with these sorts of things - the hope for money. With trading you are actively doing something to generate money.
Whether you trade in stocks or forex or crypto and any other asset class - it is exactly the same as you buying or selling toilet rolls. You hope to buy a product wholesale and sell it retail - for a profit.
The point is, trading involves active strategies with the intention of generating cash from the activity.
And because trading involves you it is just like having another job!
Being financially free means not having to have a job.
That doesn’t mean you should avoid trading all together. No. Trading can be really important on your wealth journey because this is how you can supplement your earned income and get additional money into your asset pot.
On my own journey to financial freedom I consciously did trading activities in both equities and investment property to generate cash to be able to buy more assets and so accelerated my time to freedom.
If you buy a property with the intention of doing it up to sell it - that is trading. You intend to make money on the trade - not from holding the underlying asset.
What is Investing?
Investing is when you either create or buy an asset, something that you're going to hold for a longer-term period and benefit from the growth in value of the asset and the income it generates.
For example, in shares, such as your Index Tracker Fund, you buy the fund with the intention of keeping it in your life and it helps expand your wealth by growing in value and generating income in the form of dividends.
In Investment Property, you buy a property, renovate it to add or creating a development, but instead of selling you hold onto it to increase your Wealth Generating Net Worth - by its increased value and the income it generates in rental.
With investing, the asset creates your wealth by growing in value and generating income.
With trading, your activity of buying and selling creates cash.
When you're growing your wealth, you want to be doing both of these things.
For most of us who start this wealth journey a bit late, just earning active income in a job or even your own business and putting 10% into the asset pot isn't going to be enough.
You need to increase your returns on your investments through things like Leverage and Savvy Investing and add more into the asset pot through trading activities.
There you have it, the difference between versus investing and how you use both to create your freedom.
Keep taking steps every day to fill your asset drawer because they are the only things that can create your financial freedom and reinvest those trading gains – that’s the secret.
Big love
Ann
P.S If you are not yet consistently building up your assets through automated savvy investing strategies - head over to this FREE SAVVY INVESTING WEBINAR and get money working hard for you.
