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In choosing an investment period some people prefer short term while some prefer the long one knowing the right term to use in investment could help with your financial capacity, how will I know the period that would fit me?
There are pros and cons to both long-term and short-term investing, and the most favorable approach depends on your individual financial goals and risk tolerance: Pros of Long-Term Investing: - Potential for higher returns - Long-term investments allow more time for compounding to build wealth. HistRead more
There are pros and cons to both long-term and short-term investing, and the most favorable approach depends on your individual financial goals and risk tolerance:
Pros of Long-Term Investing:
– Potential for higher returns – Long-term investments allow more time for compounding to build wealth. Historically stocks return around 10% per year over decades.
– Tax advantages – Investments held over 1 year qualify for lower long-term capital gains tax rates vs short-term rates.
– Less frequent trading costs – Infrequent buying/selling can mean fewer fees to buy or sell positions.
– Ability to ride out volatility – Long time horizons allow riding through periodic downturns in markets.
– Bigger picture focus – More flexibility to focus on overall life goals vs short-term market movements.
Pros of Short-Term Investing:
– Taking advantage of price swings – Active trading to capitalize on market volatility and price changes.
– Potentially losing less in market declines – Taking profits and getting out before major downturns hit.
– Yields from options strategies – Income from options premiums by selling calls and puts.
– Ability to pivot as macroconditions shift – Swiftly moving to new opportunities or protect assets.
– Thrill and engagement of trading – Some find frequent trading exciting and enjoy the challenge.
In summary, long-term investing tends to be lower risk and favorable for most retirement savers seeking steady growth over decades. Short-term trading can fit certain trading styles and risk tolerances but requires more active management, experience, and diligence to implement successfully.
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