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Are you looking at a 4TB 7200rpm WD Black($185) internal and comparing it to a cheap 4TB 5400rpm external HDD($90)?
As for speeds, well...
My 1TB and 2TB external Sammy M3's which take their powered from the USB port and contain Seagate 5400RPM 2.5" drives have sustained transfer of around 100MBs.
My 4TB WD MyBook which takes power from the mains and contains a WD RED 5400RPM 3.5" drive has sustained transfer speeds of around 170MBs
My WD Black 7200RPM 3.5" drive inside my PC has a sustained transfer of about 280MBs
USB 3.1 has a maximum transfer limit of 1,250MBs and the Samsung T5 (an external SSD) has claimed transfer speeds of around 540MBs
There is nothing wrong with installing games/programs on an external drive, although if you are going to do so, get an external drive that contains a 3.5" drive and requires mains power, don't get a 2.5" unpowered one, they are best kept as backup devices.
if its a ssd, the drive performance is the same
but if its a spinner, 2.5in drive is much slower than 3.5in
but as above, its the connecton between the pc and drive thats most likely the bottleneck
usb 2.0 is dirt slow for external storage
usb 3.0 is much better, enough bandwidth to max any spinner
e-sata is best, but newer boards do not support this anymore
nas or shared drive can be fast depending on the models of the drives used and network conditions
External drives come in all shapes, sizes and speeds. External drives that do not have a seperate power source are either 2.5", 5400RPM mechanical drives or SSD's, those with an external power source are 3.5" drives, these however can come in either 5400 or 7200 RPM flavours.
I know, I am using LaCie d2 10Tb right now. It's a 3.5-inch 7200rpm SATA drive in external case with TB3 connection. Still I think topic starter was considering 2.5-inch 5400rpm one. There are tons of them right now.
Get external SSD if you thinking about getting slower hard drive speed.
All my external HDDs are 3.5" with additional power bricks.
Platter density is a speed factor I've got 2 5900rpm internal 4TB drives that run 155MBs r/wr vs a 1TB 7200 rpm read 94MB / write 78MBs
Ps, anrkyuk explain how you get 280MBs on a 1TB 7200 rpm wd black? https://www.hardwarecanucks.com/forum/hardware-canucks-reviews/71023-western-digital-black-6tb-hdd-review-5.html
Best bet is buying a quality+performance based 3.5 inch HDD (like WD Black/Gold; Seagate BaraCuda/FireCuda) that is SATA-III (6Gbps) and then install into your own External Enclosure. Make sure the enclosure supports beyond 2TB limits and is SATA-III inside / USB 3.x outside. This way you get to pick your enclosure features/style, and at the same time get a drive that has good overall performance and warranty.
They do make eSata ports, but many mobos don't have that, and docking stations and hdd enclosures that are eSata are hard to find. (and also I'm not sure if it's slower than internal sata).