The Pros And Cons Of Short-Term And Long-Term Investments

Whether you are new to investing or a long time stock trader, there are primarily two major types of investments most people utilize – short-term investments and long-term investments. Learning how to buy stocks for the first time can be overwhelming but doing your research and learning as much as you can about investing can help you decide which style of investing is best for you.

The main difference between the two investments types is that short-term investments are meant to yield profits in a short time period whereas long-term investments are to gain profits over a long period of time, usually years. Short-term investment stocks generally are trendier and have short, substantial gains in a small period of time. Long-term stock investments are typically strong companies that have continued to show positive, steady gains over the years. There are definitely pro and cons to both of these investments that you should consider before deciding which investments are for you.

Short-Term Investments

The main advantage of short-term investments is their growth potential in a short period of time. This time period can be days, weeks, or months. Short-term investing can give you more control over your money as you buy and then sell within a short time period.

Short-term investments also come with disadvantages as well. A volatile stock market can make a dramatic change to a short-term, trendy stock. These types of stocks are affected by unpredictable circumstances due to the short time period. In addition to the possibility of making a good amount of profit in a short period of time, alternately, investing in short-term stocks can also lend to losing a great deal of money in a short period of time. So be aware that the risk goes both ways.

Long-Term Investments

Long term investments generally show a steady growth pace over a long period of time. This lends to long term stock investments being a more stable and less risky investment than the short-term stock.

There is the risk of having less control over your money due to the long period of time it takes for the stock to mature. Another disadvantage to long-term stock investing is how long it will take to see any profits. If you are in need of money immediately, long-term stock investments may not be the route for you.

It is also important to note that investments require fees to be paid for trading and keeping your stocks. Due to the slow profit progression of long-term stocks and the fees associated with playing the stock market, your long-term stock can seem to experience a down time before it actually becomes productive and shows profit gain.

The most important thing to consider when you are trying to decide which investment type is for you is your reasons for investing. If you are investing in stocks in order to make money quickly, then clearly a short-term investment plan is for you. However, if your investment or stock trading strategies are to save for the future then a long-term plan may be best.

Regardless of what you decide, investing today in the stock market requires sound planning, research, and investment strategy in order to make the best buys and sells you can. In the end, your investment success depends upon your willingness to take calculated risks and staying on top of your trades to ensue you follow the strategy you have decided upon.