One of the more significant distinctions between an investor’s different paths is deciding between categorizing oneself as a day trader versus a regular stock investor. What are the two exactly? Additionally, what is similar and what is different about day trading and regular stock investing?
Day trading and regular stock investing are two ways to make income on the stock market. One is an occupation and the other only an investment, but there are similarities and differences between each. Knowing about both is key to making sound investment decisions when someone is beginning trading. Day trading is a form of employment, and regular stock investing is more likely for savings, day trading and regular stock investing are similar in that they are both trading stocks for money, while they both need distinct, differing degrees of dedication to making trades.
The What of Day Trading and Regular Stock Investing
Day trading is a form of employment where someone spends the bulk of their workday buying and selling stocks on the stock market for income. The day trader would make the money they use to pay for housing and food from the stock market, and they would spend all day at work making their trades. Day trader taxes are personal income taxes for a self-employed individual, and so there are ways to reduce the tax burden like recording business expenses. Day trading is when someone exclusively trades stocks for a living, and, as such, they have little to no other forms of income.
Regular stock investing is when someone takes a part of their income and uses it to make investments on the stock market like savings for the investor. The frequent stock trader may make the occasional trade, and they will principally by using the sale of the stock to fund something they are saving for, like retirement. Taxes regular stock investors pay are only a part of their overall income that is taxable. They pay taxes on both their average income and the stock they sell. Regular stock investing is like using money someone has saved and applying it to make more money by investing in a business.
The Distinction Between the Two
Day trading and regular stock investing are similar in that people do both looking to make money investing and making stock sales. Either one can make someone a lot of money via investments. Either one is a brilliant way to get some money for retirement. Knowing the difference between these terms is essential to reducing the tax burden someone has because they are going to day trade or saving through stocks by investing without making it a profession. Though they are not the same, there are plenty of parallels between day trading and regular stock investing, and both are outstanding choices to make some income on the side.
Day trading and regular stock investing differ in that trading is an occupation, and standard stock investing is someone setting aside money to make it work for them, usually reinvesting for maximum benefit down the road.
When someone is just starting, the better choice may be to use part of the income they make already and be a regular stock investor. If someone has skill in investing and wants to spend their time making trades, there can be some benefit to making the switch in career and becoming a full-time day trader. Day trading and regular stock investing are different in a clearly defined way that divides the two concepts by the amount of time someone puts into investing.
If someone finds the concepts of day trading and regular stock investment fuzzy or incomprehensible, these topics need to be clear before they would be wise to invest in stocks. Studying these two topics will hasten to get past the learning curve an investor has when starting.
Day trading is a form of investing as an occupation, and regular stock investing takes the longer-term approach. Day trading and regular stock investing are the same in that they are both types of stock trading, but they are different in how often they use buying and selling stocks.
Putting money to work is the beautiful goal of investing, and the pursuit of making an income from one’s income is worth the sacrifice of learning how now.