Should Beginners Start With Trading or Investing In Stock on the Market?

By Sofia Thai
Edited by Taj Schlebusch

Published April 29, 2021.

Should Beginners Start With Trading or Investing In Stock on the Market? main image

Increasing numbers of people are entering the stock market to provide a second income. However, there are always question marks for beginners who are uninitiated to the ins and outs of investing. One of the key questions to address is whether they should begin trading or investing in stock when they enter the market for the first time.

The Difference Between Trading and Investing

It is first important to understand the difference between the two. Trading effectively means buying and selling stocks and equities over a relatively short timeframe to take advantage of fluctuations in the market. Day trading has become particularly popular and is often depicted in films and television programs.

Conversely, investing involves benefiting from what an investor deems to be market fundamentals. An investor will plough their money into a certain stock, equity, or commodity and then leave it there for a considerable period of time. Those engaging in investing believe that a certain market position will unfold over a period of time.

Deciding on Your Approach

As you can see, these are significantly different approaches to making money from stock. To decide which approach to take, beginners need to ask themselves a few questions first. Most notably, it is important to ascertain whether you are investing in providing a long-term nest egg or if you wish to make a profit immediately. If you really believe in short-term gain, you should naturally opt for trading.

However, as a general rule it would be more prudent for beginners to invest in a stock. This requires less technical knowledge, less market monitoring, and less interaction with the market. If beginners are going to attempt trading, they should begin with small amounts, or ideally with one of the many free demonstration accounts provided by online brokers.