1. Time Horizon

• Investing: Long-term approach. Investors typically hold assets for years or decades. Their goal is to build wealth gradually through the appreciation of the asset value, dividends, or interest over time.
• Trading: Short-term approach. Traders buy and sell assets frequently, from minutes or hours to days or weeks. They capitalize on short-term price movements and may make multiple trades in a day (day trading), or hold positions for a few days or weeks (swing trading).

2. Objective

• Investing: The goal is usually to build wealth over time by holding on to assets that have growth potential, such as stocks, bonds, real estate, or mutual funds. Investors are generally less concerned with short-term market fluctuations.
• Trading: The aim is to profit from price movements in the short term. Traders rely on technical analysis, charts, and patterns to make decisions, rather than on the long-term growth potential of an asset.

3. Risk Tolerance

• Investing: Generally lower risk tolerance as investments are intended to grow over a long period, with less concern for short-term fluctuations. Investors may be more diversified across different asset classes to mitigate risk.
• Trading: Higher risk tolerance. Trading can involve significant market volatility and quick changes in asset prices. Traders must be prepared to handle these risks in pursuit of short-term gains.

• Investing: Focuses on fundamental analysis. Investors look at factors like a company’s earnings, revenue growth, management quality, and market conditions to determine the long-term value of an asset.
• Trading: Primarily uses technical analysis, which involves studying price charts, trading volumes, and market patterns to predict future price movements. Some traders also incorporate macroeconomic news and events, but technical indicators are the main focus.

5. Frequency of Transactions

• Investing: Involves fewer transactions, as investors typically buy and hold. They might rebalance their portfolio periodically or add new assets over time.
• Trading: Involves frequent buying and selling of assets. Traders may make dozens or even hundreds of trades in a given year, depending on their strategy.

6. Costs and Fees

• Investing: Costs are generally lower because there are fewer transactions, and investors often use low-fee mutual funds or exchange-traded funds (ETFs). Taxes on long-term capital gains (from assets held for more than a year) are often lower than short-term capital gains taxes.
• Trading: Costs can be higher due to frequent trades, which incur transaction fees. Additionally, short-term capital gains taxes can be higher than long-term gains.

7. Market Conditions

• Investing: Investors often thrive in stable or growing markets. Even in a downturn, they are usually focused on the long-term outlook and less affected by short-term losses.
• Trading: Traders can benefit from both rising and falling markets (depending on whether they are going long or short on a particular asset). They thrive in volatile markets with frequent price movements.

8. Skillset

• Investing: Requires a good understanding of financial statements, economic trends, and market sectors. Patience and discipline are key traits, as is the ability to ride out market fluctuations.
• Trading: Requires a solid understanding of technical analysis, quick decision-making, and the ability to manage risk in real time. Traders often use algorithms or automated systems for high-frequency trading.

Summary

• Investing is about building long-term wealth by buying assets and holding them for years or decades. It involves a lower level of active engagement and risk management and focuses on fundamentals.
• Trading is about making short-term profits from market fluctuations. It involves frequent transactions, higher risk, technical analysis, and close monitoring of the markets.

Both approaches can be successful, but they appeal to different types of individuals with different goals, risk appetites, and time commitments.