This is the question to be answered in this video, if you are doubting which strategy you should be applying. I’ll go through the biggest differences.
When you made the choice to let your money work through the stock market, you still have to make the choice if you want to be active investing or passive investing. Now there are two choices to start out with.
Day trading is one, and most people see this as active investing, as you have to actively put in time every day to place your bets on certain stocks and securities to win money for the day.
The payout may be high per day, but the risks are also higher, compared to the passive investing style of long term investing.
The whole idea of long term investing is, as the word already describes, long term. Most people just buy a certain stock, and plan to hold on to it, for a long time, this may differ from 5 years, to 25 years.
Now there are ways, like my own method of investing, is buying a certain stock, and holding onto it, until you get profits, then you sell it off…
But if you do it purely passive, then it is just buying into a fund or etf, and then holding on to it for 25 years, and then cash out, no matter if there are stock market crashes or not.
Day trading refers to the activity of daily trading. The characteristics is that you buy and sell within the same day, and make money off the little changes. Therefore having a day trading account uses a minimum amount of portfolio of at least 25,000 dollars.. Which is not a little amount, if you want to be starting out as small day trader.
The whole idea is when you invest 100,000 dollars with a day trading deal, and a certain security is $100 each, you bought 1000 of those securities, and the moment the value of that security is $101, you sell off all those securities, meaning that you made $1000 with that single deal.
And that’s how you make money in day trading, when you just simplify it.
Now for long term investors, that growth of 1 dollar is nothing, whereas for day traders it could be win or lose on a day..
If you like the roller coaster rides like that, then day trading may be something for you, but if you prefer to take it the slow pace, well then.. Maybe the passive investing method is more for you…
They always say.. The more risk you take, the higher the payout… And that is absolutely true for active investing and passive investing… But.. Like throwing that coin to see if it falls on heads or tail … For the long run, you will see there is hardly any difference anymore…