Trading and investing are not the same thing. When we use the two words interchangeably we muddle the message. We confuse the issue.
The word trade comes from the 14th century Old English: tredan. The original meaning referred to a way or course — a manner of life. But by the early 1500s the meaning had evolved to include buying and selling as a means of exchanging commodities.
A trade, therefore, is a short-term activity with a very specific purpose — an acquisition or disposition.
Investing, on the other hand, is an activity with a longer-term intention. The word’s source, investire, is from the 14th century Latin meaning to clothe. By the 16th century, this word, too, had evolved into an activity that gives capital a new form. For our purposes: a greater, larger, plumper form.
The differentiation between trading and investing matters because too many of us freely interchange the use of and meaning of these words. They are antithetical. They are mutually exclusive. Traders intend to produce a quick, short-term gain (though the statistics would show more frequently a loss) and investors seek to increase their wealth through the long-term ownership of sound businesses.
Our friend, Benjamin Graham, author of “The Intelligent Investor,” said it like this: “But everybody knows that most people who trade in the market lose money at it in the end…they are not investors.”
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