There is no denying that the tech industry has been the biggest and most influential industry over the past two decades. Besides having an influence on our society in general, the tech industry has also had a huge influence in the world of trading, especially in terms of unparalleled opportunities.
First, we were hit by the dot com bubble, and even though that ended in a catastrophe, a lot of people made away with a lot of money.
More recently, it has been the “tech sector” or the FAANG stocks that have been behind many of the best investment opportunities. In fact, despite a few slower months, Facebook, Amazon, Apple, Netflix, and Google (Alphabet) are still responsible for a large part of the overall growth of the American stock market.
So the question we’re all asking is, what is the best way to benefit from stock investments?
Investing In Stocks Or Trading Stocks?
The first decision you have to make is deciding whether you are going to invest in the tech industry or if you are going to trade stocks. You see, there are pros and cons to both methods.
Investing
When investing, one typically buys shares in a company and sets up a target that spans a few years down the line. The goal is to sell the stocks in a few years when they have grown and you’ve made a profit.
The benefit of investing is that you don’t have to put in so much work after the initial investment. If you’ve analyzed the instruments correctly, you should be able to let them grow in value on their own. There might be times when you have to relocate some of your investments, but generally speaking, the work is passive.
The main issue is that it takes a long time to make any decent money and the risks of getting stuck in a bear market are high. For example, investors that had invested in the dot com bubble and made millions in profit but hadn’t sold their stocks saw their investments plummet in a matter of weeks.
Now, the main benefit of trading stocks is obviously that you can make a lot of money quickly.
Trading
When trading stocks your goal is to make a profit from smaller market movements by using leverage and opening and closing positions on a weekly or even daily basis.
You have a few options to choose from if you’re interested in trading stocks. For example, you can trade stocks on the exchange where they are listed or use one of the leading CFD stockbrokers and trade derivatives. The choice is yours, and the methods are similar.
Now, the main benefit of trading stocks is obviously that you can make a lot of money quickly. It’s also easier to trade on both increasing and decreasing prices, thus doubling your opportunities.
However, the downside is that trading is fairly hard to master and it will take a lot of practice. In fact, as many as 80% of derivative traders are losing money. And according to BullMarketz, between 65%-89% lose money on CFD Trading.
Combine The Two Methods
Obviously, some of the most successful traders and investors combine both methods in order to maximize profit and cut risks. This requires a lot of knowledge and a good understanding of how the market works, but it’s definitely not impossible to get a hold of.
Also, a combination of trading and investing in tech stocks is usually the safest option.
Conclusion
If you’re looking to benefit from the highly prominent tech market, you have a few options to choose from.
Two of the most common ways are to invest or trade tech stocks, and they both have their pros and cons. Therefore it’s important that you understand the differences so that you can pick the method that suits you best.
Luckily, the Internet is full of resources for people looking to learn about trading and investing, and you can start your trading journey today.
Last Updated on February 3, 2021.
