Saturday, July 26, 2014

What is the difference between investing and trading ?

As I mentioned last week , new stock suggestions will be posted only on First and Third Saturday's of every month .Meanwhile , in recent times receiving lot of mails from new entrants in stock market who are still confused about many basic terms and words using here.The below posting is only for such newbies and most of them even may cut and paste from various sources ,but I think it is helpful for them.
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Courtesy :Investopedia


Investing and trading are two very different methods of attempting to profit in the financial markets. The goal of investing is to gradually build wealth over an extended period of time through the buying and holding  of a portfolio of stocks, baskets of stocks, mutual funds, bonds and other investment instruments. Investors often enhance their profits through compounding , or reinvesting any profits and dividends into additional shares of stock. Investments are often held for a period of years, or even decades, taking advantage of perks like interest, dividends and stock splits along the way. While markets inevitably fluctuate, investors will "ride out" the downtrends with the expectation that prices will rebound and any losses will eventually be recovered. Investors are typically more concerned with market fundamentals, such as Price Earning Ratios( P/E) and management forecasts.

Trading, on the other hand, involves the more frequent buying and selling of stock, commodities, or other instruments, with the goal of generating returns that outperform buy-and-hold investing. While investors may be content with a 10 to 15% annual return, traders might seek a 10% return each month. Trading profits are generated through buying at a lower price and selling at a higher price within a relatively short period of time. The reverse is also true: trading profits are made by selling at a higher price and buying to cover at a lower price (known as "Selling Short") to profit in falling markets. Where buy-and-hold investors wait out less profitable positions, traders must make profits (or take losses) within a specified period of time, and often use a protective stop loss order to automatically close out losing positions at a predetermined price level. Traders often employ technical analysis tools, such as moving averages and stochastic oscillators, to find high-probability trading setups.

 A trader's "style" refers to the time frame or holding period in which stocks, commodities or other trading instruments are bought and sold. Traders generally fall into one of four categories:

  • Position Trader – positions are held from months to years
  • Swing Trader – positions are held from days to weeks
  • Day Trader – positions are held throughout the day only with no overnight positions
  • Scalp Trader – positions are held for seconds to minutes with no overnight positions

Traders often choose their trading style based on factors including: account size, amount of time that can be dedicated to trading, level of trading experience, personality and risk tolerance. Both investors and traders seek profits through market participation. In general, investors seek larger returns over an extended period through buying and holding. Traders, by contrast, take advantage of both rising and falling markets to enter and exit positions over a shorter time frame, taking smaller, more frequent profits.



82 comments :

  1. Thank you sir... the first two lines referring some the people like me..... thank you so much...I

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  2. Hi VP. Can u plz tell if if we can buy Ram Eatna wires. This was one of ur recc in 2010 where u later advised to book profit. Now again available at 29 bucks and their brand RR Kabel seems to be getting more visibility

    ReplyDelete
    Replies
    1. But in between company given 2:1 stock split

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    2. Ok Sor, was not aware of the srock.split, just wanted to know if its a good buy here or there are any issues with the.compant I am not aware of? I see their brand RR Kabel.on almost every electric store these days and I personally asked the shopkeepers and they are recommending it as a very good quality product..vibility has improved to a great extent it seems for RR Kabel.

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    3. As per my understanding RR KABEL is manufactured by another unlisted group company of the owners of Ram Ratna wires and not by the listed company.

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    4. But in your 2010 recc also u mentioned RR Kabel as a product/brand of Ram Ratna Wires. I tried calling company but they are not picking the phone may be because of saturday..can you provide any source where we can confirm the same.

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    5. Check once again , what I mentioned there .Not like ram Ratna Wires but Ram Ratna Group

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    6. Sorry to come back on this again, I checked again sir, here is the link to ur post - http://value-picks.blogspot.in/2010/04/ram-ratna-wires-excellent-growth.html?m=1

      Here you have mentioned---
      Ram Ratna Wires is established in 1992 which
      makes  Super enamelled copper winding wire,
      copper wire, copper scrap and PVC insulated
      winding wires. This company is a member of Ram ratna Group
      which makes wiring cable under the brand name
      ‘RR KABEL’

      Delete
    7. Yes ,what is wrong in it ?

      It is manufacturing Super enamelled copper winding wire,
      copper wire, copper scrap and PVC insulated
      winding wires

      I never mentioned it is manufacturing wiring cables . and mentioned as

      This company is a member of Ram Ratna group which ( Ram Ratna Group) makes wiring cables under the brand name RR Kabel.


      Delete
  3. Informative for freshers like me. Thanks

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  4. What is your view on sundaram multi paper. Future multibagger?

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    Replies
    1. I don't think each and every penny stock will become multi bagger in future.

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    2. Nice one VP Sir. Greed is endless.

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  5. your views on lakshimi vilas bank......

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  6. Thank you Sir. This is indeed useful for a new entrant into the stock markets like me..God Bless you for all the help and effort taken..

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  7. Vp sir kindly share your views on ITD Cementation

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  8. Dear VP sir,

    Please share your view on CanFinHomes.

    Thanks

    ReplyDelete
    Replies
    1. As of now hold it , let the details of rights issue come to take a final call.

      Delete
  9. Thanks VP Sir for posting this useful information. Please keep posting such information as this helps freshers like us in understanding stock related terms much easily.

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  10. Hi VP Sir,

    Can you please share your view on following stocks:
    Nitesh Estate @ 15.30
    Punj @ 47
    Sterling Bio @ 13.60
    Manappuram @ 22.50

    Eagerly waiting for ur reply Sirji

    ReplyDelete
    Replies
    1. Not strictly tracking any of the mentioned stocks

      Delete
  11. Indeed there is a vast difference between traders and investors. The one which succeed in the market are Investors. The man himself (Warren Buffett) is a great example of how a patient investor can beat other frequent traders and the overall market over long period.

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  12. Resp Sir,

    I am replying to one your comments you had posted on Nath Bio genes...hope you wont delete it-)

    I beg to differ on you comments "Higher productivity is the key , low pest attack,drought tolerance ..etc"...it is all lies GMO is slow poison and its a shame that Indian Govt is approving, whereas all around the world it is getting banned. For instance China recently banned GM food for its military (http://www.naturalnews.com/045443_gmos_china_food_supply.html) and many European countries have kicked off GMO. After 66 years of Independence India is again getting ruled by heartless Monsanto and others who are following their footsteps. Doing business and making profit is good but playing with peoples life is disgusting. All field trial reports are falsified. We have enough poison on our foods don't need GMO.

    Sir please do not promote GMO by using such words. Its not only us but our future generation that will be ruined by GMO.

    ReplyDelete
    Replies
    1. THERE ARE VARIOUS RESEARCH RPORTS , SOME SAYS GMO CORP.HAS NO BAD EFFECT ON HEALTH SOME SAYS IT IS NOT GOOD FOR HEALTH. in ur link there are other things too read whole text.

      Delete
  13. Dear VP,

    Well said. Thank you :)

    With Regards

    Bigul

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  14. Dear VP, Please give your opinion on holding Vijay shanthi builders. After your suggession this stock hit a decent high send now trading at much lesser price. Is it still worth holding.

    Thanks for replying.

    ReplyDelete
    Replies
    1. Reduction in promoter share holding is a matter for concern

      Delete
  15. Dear vpji, thanks for great help ur rendering. I would like to have ur view on technofab engineering. Looks like has done well in tough times. Ur comments eagerly awaited. Thanks and god bless u.

    ReplyDelete
  16. Thanks for sharing this information..this article clearly outlines the differences between two categories..and also helps us to decide what we wanna be.

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  17. Thanks vp. Valuable information.

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  18. Hello Sir, what is your view on Rubfila international. Stock has been stable for a while with a good potential in the industry into extruded rubber threads a monopoly. Appreciate if you can check the fundamentals and share your view. Many thanks.

    ReplyDelete
    Replies
    1. Not tracking it and I feel it is not a monopoly

      Delete
  19. Hi what's your take on the subdued net profit by canfin homes and their upcoming rights issue? Will you be subscribing to it?
    Thanks
    Niranjan

    ReplyDelete
    Replies
    1. Let first they announce the details of rights issue.

      Delete
  20. Thanks for the posting Sir.. Looking forward to see a similar posting on Divident, Bonus, Split, ex-dividend & book closure dates in detail. Thank you very much.

    ReplyDelete
    Replies
    1. Do you know that there is something called Google my friend?All the answers to your queries are available at your disposal if you put in some effort..

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    2. Yeah nice request. i second it VP sir.

      Delete
  21. Dear Sir, Kindly advise on Ybrant Digital. The company came out with stellar numbers.

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  22. This company showing good result on one side but on the other side after showing such improved result promoters are continuously selling their stake .Whether the numbers are stellar or not ,I am not interested to recommend any stock where promoters are selling their stake on a continuous basis in each and every quarter and difficult to swallow the result as such on the background of promoter selling. If anybody making money on any stock I am happy ,but I cant recommend a stock which do not follow my stock selection parameters.

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    Replies
    1. Sir dont you think as a value investor you should disclose what's your selection criteria for investing in stocks?

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    2. My criteria is simple


      Futuristic business

      Good promoter having capacity to tap the emerging opportunities in such business and sincere to minority share holders

      Stock should be available at attractive valuation.

      Delete
    3. Hi sir, this cud be due to sale /inovocation of pledge shares as the percentage of pledge shares coming down every qt
      regards-sumesh

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    4. OMG!! Just checked its disclosure on insider trading at bse, its seems the promoter is artificially increasing trading volumes by buying and selling on same date-9 th July .... Highly suspicious activities

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    5. @ Sumesh

      It is not a single instant .Continuously in past four quarters promoters are reducing their stake . More than that , even if I accept your argument of pledge invocation ,my question is Why the promoters of a company with turn over of more than Rs.1700 Cr and a net profit of Rs.220 Cr is not in a position to arrange few crores to repay their debt and avoid pledge selling . ? .One more doubt ,if this selling is due to pledge invocation why it not happened when its share price fall to Rs.2.50 and happening only when this share price starts to rise ?.

      Another important point is ,as per my understanding if any of the promoter entity sold shares,even if it is a single share ,it should be disclosed in the prescribed format to exchanges where its shares are listed . In case of this company , one of the promoter entity Redmond Investments Ltd reduced 6000000 shares in last four quarters which is known from share holding pattern .But I could not find disclosures filed in this regard so far in BSE.

      Since I have not suggested this stock and not planning to do so ,please avoid repeating question on this stock which will waste only time and efforts.




      Delete
    6. The last reply in this subject to the second reader

      I have no proof to say the promoters are artificially creating volume . On that day there was a bulk selling by one promoter ( other than Redmond Investments Ltd) for 3600000 shares and they disclosed it to the exchange .As per disclosures this seems part of shares he acquired from a third party few days back of that transaction.

      Delete
  23. Thanks for a nice article, I'm following your blog for over a month and I'm a newbie to stocks. Just got a demat account, but I'm hesitant to buy stocks as the market is in wild ride (my view). Could you suggest few stocks at current market level to accumulate , however to get an idea I'm going through all your articles for past few days.
    Once again thank-you for your views and suggestions on stock-market,

    ReplyDelete
  24. Could you please advise on biocon after the results?

    ReplyDelete
    Replies
    1. If you are a long term investor ,still hold it

      Delete
  25. Sir
    I am just one month old enterent to the stock market and just following your link since bigining.I am following few stocks from last one month like
    1.LG Balakrishan and sons
    2.Finolex cables.
    My query is that as per information there is no good or bad news regarding these companies nor about there operating sectors. But still there is a huge fluctuation in stock price on daily basis.as I told I am new and some what in learning phase my source of information is only TV or money control app.
    Sir I want to know that 1.how we come to know that this is right time to enter the stock in this high fluctuations....
    2.why these stock are fluctuating so much (without any business factors)
    Sir plz consider my query as a new enterent and small investor....
    Thanks and regards
    UB

    ReplyDelete
    Replies
    1. First decide whether you area trader or investor

      Try to take decision on the basis of fluctuation,volume...etc etc if and only if you are a trader

      If you are a genuine investor ,forget about market fluctuations and try to study and analyse company and its business and reach a fair valuation based on your study and act accordingly

      Delete
    2. Thanks sir.....I am a small invester ......

      Delete
  26. Sir, your opinion on kokuyo camlin, if you are tracking the stock?

    There seems big capacity expansion in place.

    Thanks!

    ReplyDelete
    Replies
    1. Some signs of improvement is there

      Delete
  27. Hi sir,
    Could you please put some light on gufic bioscience is it worth buying .

    ReplyDelete
  28. Sir what are your views on dynamatic texhnologies and Jain irrigation

    ReplyDelete
    Replies
    1. Dynamatic Tech is good one for long etrm investors, JAin irrigation already recommended at lower level

      Delete
  29. Hi,
    Thanks for not only recommending stcok but also answering all our answers.. Wanted to know about Psu Stocks since the NPA is coming down so wanted to know is it good time to invest in PSU stocks and wanted your view on Central Bank .. please reply if possible...

    ReplyDelete
    Replies
    1. Generally not tracking much PSU stocks ,especially PSU banks

      Delete
  30. Dear VP sir

    A humble request. Can we have guess the stock once in 8 weeks? Will provide a learning opportunity for your followers and in a way will move folks in doing their own analysis and realise the rational views of your recommendations. Thanks

    Shankar

    ReplyDelete
    Replies
    1. Dear Shankar

      For a GTS ,before giving clues I should check all the other companies whether the given points are repeating in any other companies . It is taking lot of time ,shall consider when time permits.

      Delete
  31. Dear VP,
    KUDOS! on a great blog.
    I stumbled upon your blog just a few days back and could not help reading all the write ups from a year back. Great work!
    Lots of winners, even if one discounts that the overall markets have been up.

    Only stock I hold from the list is Astra Microwave at levels of 84.

    What's difficult for investor like myself is the decision when a stock goes up too fast. I contemplated selling it at 150, but thought will wait until result, maybe someone knows something!
    Now am wondering if I should risk the event or book half of the decent profit I have at CMP of 126. What would u suggest in case of AMPL and in general for investor cum trader like myself??

    Pls reply.

    ReplyDelete
    Replies
    1. Those with above average risk can still hold ,otherwise take your capital out and make it cost free

      Delete
    2. Dear VP,
      What did you make of the results of AstraMicrowave ? I know you already have given your opinion to HOLD if risk appetite, but can you please reply if you are happy with the results or if it has changed your viewpoint ?

      Delete
  32. Sir, for valuing a stock what should we consider EBIT or NPAT and do you have any view on pondy oxides.

    ReplyDelete
  33. Please 'let us have your views on Panasonic Energy and Ador Welding.

    Regards
    Anand

    ReplyDelete
  34. Dear VP Sir,

    Please share your view on Mirza International. It has continues growth, Less valued than peers., Has good brand value ( Red Tap )

    ReplyDelete
  35. Namastey VPji,
    I just want to know the detail of one of ur recommendation Punit resins ....I would also like to know about its so called sister concern company Rishiroop Rubber...both companies are at very low price against their financial performance...can u plz help me in these both companies...as wot I think that this looks great as the plastic sector are growing and also leather companies are boosting ...don't u think that these both companies should be beneficial from the revival of both the sectors...plz help me in this regard....

    ReplyDelete
    Replies
    1. Its top line is flat for past few years , that may be the reason for investor's apathy

      Delete
  36. Sir your view on nath biogene and balaji amines result

    ReplyDelete
  37. Sir do you track Cords Cable Industries pl Comment your perspective for long term Investment.

    ReplyDelete

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