Many people have mixed up the terms “ Investor ” and “ Trader ” to mean the same thing. They can’t be more wrong. It is exactly the mixing up of these 2 very important terms that led to many people starting on the wrong foot in the capital markets.
So now, let’s differentiate the two:
An investor is any party that makes an investment.
The term has taken on a specific meaning in finance to describe the particular types of people and companies that regularly purchase equity or debt securities for financial gain in exchange for funding an expanding company. Less frequently, the term is applied to parties who purchase real estate, currency, commodity, derivatives, personal property or other assets.
The term implies that a party purchases and holds assets in hopes of achieving capital gain, not as a profession or for short-term income.
A trader is an individual who engages in the transfer of financial assets in any financial market, either for themselves, or on behalf of a someone else.
The main difference between a trader and an investor is the duration for which the person holds the asset. Investors tend to have a longer term time horizon, whereas traders tend to hold assets for shorter periods of time in order to capitalize on short-term trends.
