Many Who are planning for investing their hard earned money in to stock , always confront with dilemma Whether to invest in the market for longer duration , let say period of more than 3 years , or invest in market for period not less than 2-3 months to 3 years . In both the situation the investors are gullible they are not aware when, where, how much to invest, for that is all covered in under different articles , but for now let start with the subject of this article –
Long term investing vs. Short term investing In Stock Market
- When you are investing for long term your time horizon is more than 3 years , it can be for as long many year you want to keep the stock, while short term investor keep the stock up to 1-3 months to 2-3 years .
- Long term investing is for wealth building over a period of time, let say you invested in property that grew over time, but exception here is stock you are going to invest can corrode your wealth also, While short term investing is like doing some business or job for earning over period of time , exception stock can deplete.
- Long term investor does the fundamental analysis of the stock for longer periods(you can find more articles about that on our blog), for performance of stock in last 5 years , while the short term investor does rely on fundamental analysis for shorter durations and technical analysis , is that most short term traders, swing traders and day traders follow.
- For long term investing you keep margin of safety I e. if you go wrong you are going to lose that much amount of money let say 1 percent after anticipating the fair value of stock , while short term investor keep their stop losses , rely on support and resistances for saving their capital
- Long term investor does fundamental analysis on yearly basis of companies balance sheet , profit & loss account , look prospective of share for 5 years , While short term trading can done on relying of result of single quarter of a good company , combining with technical analysis.
- For long term investing can be done part time, while short term investing can also be done part time or full time.
Which type of investing you follow depends upon your attitude, purpose of investment, but both requires you to be updated on timely basis of companies events, news, macro happenings in the industry. Short term investing requires you to be more informative rather than its counterpart since chances of loss are more because of market fluctuations.
Also doesn’t follow any advisor or broker that can be misleading, learning technical analysis , fundamental analysis from books yourself or learn from experts , then dive in the river. Otherwise you will going to ruin your hard earned money.
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