There are mainly two paths by which you can earn money in the share market: value investing and intraday trading. However, value investing and intraday trading are the different perspectives of generating profit or wealth creation in the share market.
💰 What is Value Investing ?
When you invest in the share market with a long-term view to create wealth successively over the period, it is known as value investing. In this, you do online investing in securities with the motive of building wealth. It is held for a long period with several benefits like stock split, bonus stock, dividend, etc. In this, Investors are anxious about the basics of the market and not about the trends that modify every day.
📈 What is Intraday Trading ?
Unlike value investing, Intraday Trading is a volatile and short-term investment where you purchase and sell the shares within the same trading day. In this, you do online trading of securities with the motive of making a profit. You do not receive the delivery of securities in intraday trading.
📌 Also read: How to Invest like Warren Buffett and Charlie Munger ?
Difference Between Value Investing and Intraday Trading
The main elements that differentiate value investing and intraday trading are as follows:
✅ Differentiating Factors for Value Investing
| Elements | Value Investing |
| Holding Period | In Value Investing, securities are purchased from a long-term perspective, and any change in price in the short-term doesn’t change your investment opinion. The holding period of such investment may vary from one year to several years. |
| Capital Enhancement | Value Investment is a skill of building wealth through capital enhancement with several benefits like stock split, bonus stock, dividend, etc., over the holding period by purchasing quality stocks. |
| Risks Associated | Value Investing comes with inherent risks associated with it. Still, as the change in price daily doesn’t affect long-term investments much, the risks associated with value investing are much lower. Moreover, the benefits like compounding returns and dividends help lower the associated risks. |
| Types of Stocks | In Value Investing, you are required to carefully select the best securities that can rise and give good returns. You have to choose those stocks with the best management team and good growth potential. |
| Analysis | In Value Investing, you can apply fundamental analysis to get the stock’s intrinsic value. |
✅ Differentiating Factors for Intraday Trading
| Elements | Intraday Trading |
| Holding Period | In Intraday Trading, you don’t keep any position unclosed at the expiry of trading hours in a day. The holding period may vary from a few minutes to a few hours. |
| Capital Enhancement | It is an ability to time the stock market. When the stock price changes in a favourable direction, you will sell your stock. |
| Risks Associated | Intraday Trading also comes with inherent risks associated with it. Since the instant changes in price largely affect short-term investments, the risks associated with intraday trading are much higher than value investing. |
| Types of Stocks | In Intraday Trading, you are more attached to good and fast returns. You can select those stocks which have high volatility. |
| Analysis | In Intraday Trading, you have to evaluate stock prices by technical analysis using historical patterns and charts. |
Takeaway
When you invest in share market, both value investing and intraday trading have proven paths to earn profits. The opinion for value investing or intraday trading fully relies on your needs, risk profile, financial goals, and investment horizon. Moreover, the allocation of your investment should be based on financial goals.
Whether you are doing value investing or intraday trading it is very crucial to understand the stock market fluctuations so that you can surely succeed in earning good profits.
📌 You can also read:
- Difference Between Intraday and Delivery – Which is Better?
- Difference Between Fundamental and Technical Analysis
- Debunked: 10 Biggest Myths about Saving and Investing
Happy Investing & Trading 😇
Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.
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