When you’re thinking of creating a financial portfolio for the first time, it can feel like you have thousands of important questions to answer. You need to figure out what you’re going to be spending your money on, how much you can afford to spend, and so much more. However, before you can get too involved with more complex topics like penny stocks or day trading, you need to start with the basics. The most common question that experts hear when people begin to enter the securities space, is what’s the difference between trading and investing? Here, we’re going to help you get to the bottom of this crucial distinction once and for all.

It’s All in the Motivation

At first glance, trading and investing look like two very similar practices. In both cases, you spend a portion of your money (capital) on a security (an asset). The idea is that you buy the asset, whether it’s a specific currency, a piece of real estate, or a stock, at a time when the price is low. After a little time, you take advantage of changes in circumstances and the economy to sell the security for a higher price. Some people hold onto the things that they buy for extended periods of time lasting several years or decades. Other people prefer to act far more quickly, moving between positions on a daily basis. The biggest difference between whether you can identify yourself as a trader or an investor, is the motivation behind your action.

Generally, if you’re trying to hold onto something for an extended period of time because you believe it’s going to have more value in the future, then you’re investing. This strategy generally comes with a lot less risk, and it’s designed to deliver wealth in the long-term, perhaps as part of a retirement strategy. On the other hand, if you’re looking to turn a profit quickly, then you might be the kind of person who could thrive as a trader.

Turning a Profit Fast

While there’s no guarantee that any stock or security will instantly make you money overnight, you’re much more likely to make cash quick when you’re trading. There’s usually more risk involved with this process because you might lose money as well as gaining it. Additionally, you may need to move a lot faster to achieve your goals. This could mean taking a more active position in the way that you spend your cash.

The good news is that if you learn how to create the right strategy, you can make a massive profit from trading. Over time, you can even develop strategies that are intended for more specific experts, such as shorting penny stocks. With a little luck, you’ll try to earn money fast, so you can continue building your portfolio over time. Although there are other differences to consider when it comes to investing and trading, the most important thing to remember is that your motivations will make a huge difference in finding the solution that’s right for you.