Trading is the speculative purchase and sale of financial instruments (stocks, bonds, futures contracts, options, currencies, etc.) with the intention of profiting off a change in price. Unlike an investor who buys financial instruments with the goal of selling them after an appreciation in price (usually over the course of a year), the trader can make money when the instrument goes up or down in value, and does so over a considerably shorter period of time than an investor.
For example, an investor may believe that IBM is a good company. The investor purchases ownership shares (stock) in IBM, expecting that over the course of time the company will be profitable and the stock will appreciate in value, as well as pay dividends. The investor may buy IBM at $10.00 a share, and hope to sell these shares ten years from now at a considerable premium, i.e. $100 a share. Once the investor purchases the shares, he or she usually will hold on to the investment (called "buy and hold") until either there is a need to cash out the investment, or there is reason to believe that the long term prospects of the company will be changing for the worse. Throughout the course of time, IBM stock may fall below what the investor paid for it, either due to general market forces or poor earnings reports. However, the investor is not interested in these relatively short movements, expecting that as time passes the investment will be realized at a profit. Most people who own mutual funds through retirement accounts are investors, their money is invested for the long term in a pooled fund of stocks.
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