Investing is where you will learn fundamentals of a stock, buy it, hold long term for the expansion & capital appreciation to take place.
Investing is passive, here the money works for you.
Trading is where you do not learn fundamentals of the stock, buy it, hold for few hours to weeks, reap the gains & sell it. Trading is active, here you are spending your time, money & efforts to manage your money.
Which one you should choose?
Following are the further parameters which Warren Buffett used to determine the path.
PROFIT & LOSS PROBABILITY
Investing is Long-term & there is NO LOSS above 5 years if you hold fundamentally good growth stocks.
Trading is Short-term & there will be STOP LOSS triggering more often.
Tax Cuts are very less with Investing as there are No Sell in < 1 Year. The Tax Bracket on Long-term Capital Gains will be 10%.
Tax Cuts are very high with Trading as there will be more often Sales. The Tax Bracket will be 30%.
POWER OF COMPOUNDING
Due to the higher chance of Profitability & Less Tax Cuts – the money will be Accumulated for compounded growth.
So Power of Compounding works more with Investing!
This is the reason Warren Buffett chose to be Investor & Allow money to work for them.
While the Trader without understanding the whole picture Work for money and making rich the advisor, broker & government.