Investing and trading are two very different approaches to growing wealth in financial markets. The main difference lies in time horizon, risk level, strategy, and behaviour.

1. Time Horizon

• Investing: Long-term approach (years or decades). Focuses on wealth creation through compounding.
• Trading: Short-term approach (minutes, days, or weeks). Aims to profit from quick price movements.

2. Objective

• Investing: Build long-term financial security—retirement, education, wealth creation.
• Trading: Generate short-term profits by actively buying and selling.

3. Basis of Decision-Making

• Investing: Relies on fundamental analysis, company performance, earnings, valuation, and long-term potential.
• Trading: Uses technical analysis, charts, indicators, price action, and market trends.

4. Risk Level

• Investing: Lower risk when done with diversification and asset allocation. Volatility is acceptable as the goal is long-term growth.
• Trading: Higher risk due to leverage, speed, and constant market fluctuations.

5. Frequency of Transactions

• Investing: Low. Buy-and-hold strategy.
• Trading: High. Multiple buy/sell positions in a short period.

6. Effort & Engagement

• Investing: Minimal monitoring once the portfolio is set.
• Trading: Requires continuous monitoring, quick decisions, and strict discipline.

7. Taxation

• Investing: Taxation for gains fall under Long Term Capital Gain (LTCG)orShort Term Capital Gain (STCG) depending on holding period.
• Trading: Active traders may be taxed as business income depending on frequency and style.

In Summary

• Investing = Long-term, wealth creation, lower risk, fundamental analysis, compounding.
• Trading = Short-term, profit-taking, high risk, technical analysis, frequent transactions.

Most retail investors are better served by long-term investing through SIPs in mutual funds, and following asset allocation, rather than high-risk trading.