Ask investors which stock investment is better, long term or short term, and many of them would probably answer long term. However, despite the appealing advantages of long term trading, considering short term trading is still a good option. The best decision though on which investment to take depends on the person making the investment. Because each person is unique, investment would depend on his personality and risk profile.  

Let’s take a look at the advantages and disadvantages of these two investment scheme. 

Short Term Investment (Pros) 

1. Return of investment is fast.
2. You don’t hold on to your investment for a long time, which can suddenly be wiped out due to market drop.

 Short Term Investment (Cons) 

1. Cashing out too early can lose your chance on huge potential gains.
2. You incur more commission expenses.
3. More time is needed to monitor prices.

Long Term Investment (Pros) 

1. Fewer trades are made resulting to less commission costs.
2. You can receive nice dividend payouts.
3. Longer hold on your investment means greater chance for you to earn profit.
4. Monitoring prices all the time is do away with.

  Long Term Investment (Cons) 

1. You need to have lots and lots of patience as it may take years for your to earn profit on your investment.
2. You need to have strong will to face the highs and lows of prices in the market.
3. Profits are not immediately realized.

Whichever type of investment you choose, just make sure that the market conditions are right and the right kind of stock is bought. 

This entry was posted on Tuesday, July 15th, 2008 at 6:45 pm and is filed under Investing Basics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.