Online Share Trading vs Investing: Which one is for you?

The Internet has created countless opportunities for people to earn more income aside from what they already make from their day jobs. Online share trading and investing, for example, are two things you can do to make money online.

Share trading and share investing are two very profitable ventures for those who know how to work their way through it. The good news is that anyone who’s interested and determined can master these trades without having to take a course or do training in a formal environment because everything can be done online.

If you are a newbie to the world of stocks or shares, online or otherwise, you may still be a little confused with the terms ‘share trading’ and ‘share investing’. Online stock traders are more interested in short-term opportunities while online stock investors are more focused on long-term opportunities for growth.

Online Share Trading

Online share trading has a number of benefits and advantages that make it more desirable and more enticing as compared to traditional stock trading. These advantages include:

• Lower costs – It is more affordable to enlist the services of an online broker as compared to a traditional one. While brokering companies charge you on a per transaction basis, online brokers have tiers by volume of transaction and charge accordingly.
• Full control over your shares – You can perform trades anytime and anyhow you please. You can take risks if you truly believe that they are worth taking without a stock broker holding you back and, possibly, leading you to a missed opportunity.
• Immediacy –They say time is money and in the world of share trading, every second counts. Online trading not only provides real time updates regarding the performance of stocks and shares. It also allows traders to perform trades real time.
• Unlimited trades – Unlike traditional share trading where traders need to adhere to brokers’ minimum and maximum trade allotments, online trading allows you to perform as few or as many trades as you want. There is also no limit as to who to make trades with, no matter where they are in the world.

Of course, there are also disadvantages such as the risk of losing money (common in share trading, online or otherwise), sorting out and paying for your own taxes and the inevitable technical problems that you will encounter along the way.

Online share trading is fast-paced. As you get through the day, you are expected to course through a number of different trades. You are also expected to do a lot of research, especially when it comes to the financial history and background of companies with which you are dealing.

Online tools provided by online brokers afford clients updated market reports and sometimes even free seminars to improve your skills in trading.

Any money used in share trading is also expected to be cashed in no further than six months after you have started so it is not something you can consider as a fund for the future.

If you want to make money full time from online share trading, you can be a day trader who buys and sells stocks every day. You monitor the movement of stocks every day, and on a daily basis buy and sell stocks until the end of the trading day.

It’s a hit and miss thing for the first few months as you familiarise yourself with the market and with the overall practise. But if you are willing to devote your 9-5 to this venture, it could be profitable in the long run.

Online Share Investing

Online share investing is the opposite of share trading. The goal of share investing is to accumulate wealth from shares over a period of time in a gradual manner by means of buying shares and holding.

One of the most common ways that investors enhance their profits is through a practice called ‘compounding’. This basically means re-investing profits and dividends from earning shares into additional shares.

Unlike in share trading which covers a myriad of stocks, share investing focuses on those which are considered ‘blue chips’ or those which are regarded as stable and which thrive in economic prosperity and survive through economic turmoil.

Investments on ‘blue chips’ are for long term so you don’t buy it today and sell it tomorrow or in the coming weeks. The beauty of stock investing is that it’s for the long haul; the longer you hold on to the stocks, the higher profits they generate. As a bonus, some of these stocks even give out a quarterly dividend.

Just like online share trading, investing also has benefits and advantages. These include:

• Independence and freedom – Because access to the market is made easier by the internet, investors can enjoy independence and freedom when it comes to deciding when to buy shares and where to buy them from. Real time updates are easily accessible, allowing investors to make better decisions on their own.
• Minimised broker fees – Investors can enjoy lower broker fees when investing or trading online. Online brokers charge by volume, unlike traditional brokers which charge per transaction.
• Easy access to information – The Internet has the power to give you everything you need to know about a company in an instant. Information that once was only available to licensed brokers are now on the Internet for anyone interested to see. Some online brokers provide market reports and charts to help you better decide.
• Real time transactions – Nothing is worse than missing a golden opportunity at buying shares because your didn’t execute the transaction on time. With online share investing, everything happens in real time and all updates can be viewed in real time as well.

If you are looking for something that you can use to build wealth for the future, online share investing is definitely for you. It is a perfect platform for growing your retirement fund, kids’ college funds or a trust fund that you and/or your family can fall back on in case you are no longer able to provide for them in the future.

Liquidating money used in online share investments should be done, at the very least, a year after you acquired the investment.

Unlike share trading, investing is not something you can consider as a regular source of income. Since it is meant for long-term, the profit comes a lot later; the longer you keep it, the higher the return. Unless the stocks give out dividends on a quarterly or annual basis, you do not expect money from these investments soon.

Whether you’re trading or investing in shares online, it’s important to always do your homework. Research and understand share trading and investing and pick one that you think is best for you. Only do online share trading and investing business on reliable sites like E-trade, CommSec, CMC Markets, ShareBuilder and TD AmeriTrade

Before you go and actually trade or invest with real money, you can ‘play’ with simulator apps that allow you to get a good grip of how everything works. Most trading sites will have this on the website to allow their users to practice with real world data before doing the real thing.

Did you find this article useful? Do you have some ideas of your own that you can share to our readers? Share your own experience by leaving a comment below.