Play your own game–invest, don’t trade.

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.

RELATED: Checking back on our 2014 stocks to watch

MORE: Temper speculation with common sense

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.”

Click here for more:

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s