trade talk

Long Term Investment Vs Short Term Investment

In our previous post, we discussed why investing in stock market is a better option as compared to several other investment options available. Now, let’s move one step further to understand our investment priorities, before we invest our hard earned money in the stock market. There can be varied ways of trading or investing in the stock market. For now, we will broadly classify them into Long Term Investment and Short Term Investment or Trading.

Let’s understand the significance of both one by one.

Long Term Investing

Long Term Investing is a strategy that involves investing in the Stocks for over a period of one year. Though the above is just a definition as described by the Market Gurus. As a layman, our definition of Long Term Investment should be keeping our money invested in a diversified portfolio, over several years (may be decades). It involves a thorough commitment to keep our portfolio invested in the markets, regardless of market behaviour.

Now why would I want to go for long term investing? Some really compelling reasons can be:

1. It is an easy investment option for new investors: All you need to do is pick up some good blue-chip stocks having strong fundaments and a good and trusted growth story and a great vision for future. No need of reading daily charts, technical and other stuff.

2. Less time consuming: It is a good option when we don’t want to invest a lot of time in constantly tracking our stocks. This also helps up to concentrate on our jobs or businesses rather than being worried about our investments.

3. Benefit from averaging: When we invest for long term in stocks, at times the values of stocks come down because of the falls in the stock market. These falls provide us with opportunities to buy our stocks at lower rates, thus bringing down the rate average price of purchase leading to a better ROI

4. Tax Gains: If you keep stocks for a period over one year before selling them, you stand to gain on the tax front too as you are exempted to pay Capital Gain Tax of 15% to the government, which short term traders have to pay.

5. Less Risk: As a long term investor, you are exposed to far less risk than any short-term investor, as in the long run chances of capital erosion are highly unlikely.

Oh Wow, So Long term Investment gives good returns, gives no headaches & saves my capital. So why do I even Consider Short term Trading? Well, here can be a few points to suggest Short Term Trading is a brilliant option too:

1. Biggest point in its favour is, the success stories of people became rich ultra-fast from their humble background are of traders, not the long term investors. ?

2. Long term investment gives some increment to your savings, but Short Term Investments or Trades becomes an additional source of income in itself.

3. When invested for long term, you have to block your money over a long period of time to get handsome returns. But when trading, you are always sitting on cash, which you can utilise at your free will.

4.  When invested for long term, your money is never free, even when the market falls. But trading gives you an option not to enter the market at all. Thus eliminating the market associated risks completely.

5. Trading gives you an option to make a moulah even in falling market, by selling your stocks at higher prices and buying them again at lower prices. We will take this up in detail again when we discuss advanced trading techniques in our upcoming posts, so keep checking this blog regularly. A lot many things are lined up for you.

We are sure, that now, you might be tempted to Short Term Trading and want to try your hand in it. Excellent!!! Now you’re a party to those who lose money in the Stock Market.

Shocked???? Confused????

I am sure you are. You might be thinking than why am I confusing you?

No, I am not confusing you. Just telling you that Short Term Trading can be a boon if you are an experienced trader, but a bane if you are an amateur. There is a very thin line between intelligent trading and speculation. Many people fall prey to speculate, which is as good as putting your money on some XYZ horse in the Race Course. But intelligent trading in an art and science coupled with endless number of hard work you put into your research in the stock market. You need to give time and energy and dedication of course, if you really want to earn good money.

If you use the tips given to you by someone who claims to be an expert, you are always likely to lose. And I will never ever advice you to work on tips. Yes you can use them as an aid for your own study, but it’s your own conviction and your own research which can earn money for you.

So as a fresh trader/investor what should be your strategy?

I would suggest, invest initially in some good stocks. And learn short term trading techniques along with your own thorough research of the stock market. Slowly enter into trading, but don’t over expose yourself in trading. Let’s say you have Rs. 100 to invest. Buy stocks worth Rs. 90 for long term investment. Keep Rs. 10 for your trading.

And even if you convert those Rs. 10 to Rs. 50, don’t ever think you cannot lose money. That will be the biggest mistake. Out of the Rs. 50, don’t forget to buy stock worth Rs. 30 for long term investment. Your bonus will be now you can trade with Rs. 20.

This is the basic rule. If you can follow it, you will probably not regret. But always remember everything is subject to market risks. Only You can find your own comfort zone and no one else can.

We at Moneypalm always want you to make the right choice, not the more lucrative one, as our motto is “Together We Grow”. If you grow, we grow along with you. We are a family after all.

Have a happy and profitable time investing!!!


Thank you Mr. Dixit for your simple expression.I have liked 9:1 ratio of investment which I am going to start soon.

Mathew EllisUSA

Hey @Pratyush Dixit! Thanks for giving a great info in such a simplest ways. yes I am also an investor and always prefer to go with Stock, Forex and Crypto trading. Short term investment is something very time consuming and folk have to wait a lot to see outcomes.

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Pratyush DixitConsultant - Digital Marketing and Content

Pratyush is a Post Graduate in Marketing Management and has a leadership experience of nearly a decade in diversified industry including Stock Broking. Having headed companies for over half a decade, Pratyush brings with him, rich Marketing and....

636297234239146146_Pratyush-Dixit.jpgPratyush DixitConsultant - Digital Marketing and Content
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