Long Term or Short Term, Find Your Balance: Your Guide to Investing Right

Long Term or Short Term, Find Your Balance: Your Guide to Investing Right

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Today, on the #MotivationalMonday Financial Desk, we have

  • Long-term investing: What, why & how
  • Short-term investing: What, why & how
  • What’s your investor persona? Quiz it out
  • Conclusion

Long-term investing: What, why & how

Are you an impulsive investor looking for a strategy to stop being so impulsive? Then, keep reading. This is for you. 

What is long-term investing?

Long-term investing is like purchasing a piece of land. You invest now to profit later. It focuses more on a solid strategy than on hot stocks. Although the stock market is volatile, long-term investors always stick to the plan rather than chasing a hot stock. The investment is held for long periods and is recommended for people aiming to accumulate wealth for children’s education, retirement, etc. 

The liquidity is low to moderate, and the risk level is high. Oh ho!

Why long-term investing?

Suppose you step into a college. And they give you the option of sitting in any class you wish at any time of the hour. You could either follow your curriculum and sit through the classes you planned and learn, understand and master the subjects you want or hop from class to class, learning bits and pieces and finishing college without really knowing anything. The first is long-term investing. While the market changes its mood, you can focus on a few handpicked investment options and accumulate wealth. 

A few benefits of long-term investing include:

  • Compound interest (hmm, interesting!)

Long-term investments offer compound interest rates. This snowball effect makes it easier to achieve goals such as purchasing a home or a car. 

  • Tax benefits

Long-term investments are taxed lower than short-term investments. In other words, earn more without losing more?

  • Discipline & financial hygiene

Starting a long-term investment brings financial discipline. It’s the right choice to develop a steady investing habit. Say no to impulsive spending; say yes to mindful investing. 

  • Higher returns

Experts believe that long-term investment offers higher returns than short-term investments. However, consider your risk tolerance before investing. 

How to invest in long-term investments?

Options are plenty when it comes to long-term investing. A few of them include

  • Public Provident Fund (PPF) and ETF
  • Bonds
  • Mutual funds
  • Gold
  • Fixed deposits
  • National Pension Scheme (NPS)
  • Equity funds

Mull over it while we tell you more about short-term investing. 

Short-term investing: What, why & how

Before we explain, let’s start with the cardinal rule: Short-term investing is mostly for seasoned investors and traders!

What is short-term investing?

Short-term investing involves buying and selling shares in a brief period, ranging from days to months. It involves frequent market activity and high risk. The trader might chase hot stocks and drift from the investment strategy, making it more emotional than analytical. This is ideal for active investors, as constant market monitoring is key. 

Why short-term investing?

The goal here is to profit immediately by leveraging market fluctuations or short-lived opportunities. It relies on technical analysis of short-term market trends. We are talking about charts, patterns and market indicators here. If you are a trader who wants swift gains and smaller returns, you might find short-term fascinating.

A few advantages of short-term investing include:

  • Flexibility

Short-term investments are more flexible because they do not need to mature. Investors can buy and sell as they please. 

  • Quick & easy profit

True to its name, short-term investments ensure quick profit. Make substantial profit in a very short period. 

  • High liquidity

Short-term investments typically thrive on high market liquidity, allowing them to be quickly and easily converted into cash.

How to invest in short-term investments?

  • Short term funds
  • Fixed deposits with shorter tenure
  • Stocks, commodities & derivatives market
  • Equity mutual funds
  • Liquid mutual funds

Confused? Let’s quiz your investor personality to help you find the balance.

What’s your investor persona? Quiz it out

Are you an investor or a trader? 

If you can answer this question, your persona is easy to guess. If you are an investor, you prefer steady investments, less risk and long-term options. But if you are a trader, then you are a fiery-eyed, adrenaline-popped hero who would like to hold stocks only for a short period. Both are recommended as long as the portfolio is diversified. 

Instead of investing all your capital in the long or short term, try mixing both. Make a cocktail of them and watch how they cushion you against market volatility. Never put all your eggs in one basket. And do not let your emotions make the investments. You will cry over that later. 

Be analytical, diversify and make informed decisions. May the odds be in your favour. 

Conclusion

It is imperative to clarify your investing goals before investing. Understand your risk tolerance and devise an investment strategy. Remember, long-term or short-term, it is all about finding the right balance. 

Thank you for reading. To learn more, DM us or post your questions in the comments. Don’t forget to tell us about your investment strategy!

Very informative

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