Long-term versus short-term: which is better when investing?

Author: Andrew Regan

Author: Andrew Regan

The temptation to invest money in either the stock market or shares is an easy move to understand. Both can provide relative financial security when approached properly, and the potential yield from stocks and shares, as opposed to savings accounts, is great. Right now though, choosing the best financial products is of premium importance, as even the financially savvy have realised that regular savings accounts dont necessarily offer your money the best protection in times of crisis.

If you are looking to invest your money, there is one key decision you have to make from the start: long-term or short-term? There is no hard and fast rule that says you have to pick one or the other indefinitely, but it is considered good financial practice to choose one path and stick to it, at least in individual investments. Likewise, the jurys out on which choice in better too.

The obvious decision clincher for most people would be, can I realistically afford to lose some or all of this money? If the answer is no, then a fund could very well be the best option for you, rather than buying individual shares, as a fund is made up of several shares from several companies (up to 150), so avoids the risk of having all of your eggs in one basket.

The advantages of short term investments (anything from a few days to 3 months) lie in their potential for fast growth and the opportunities which can be found in quick market changes. Of course, your money isnt out of your hands for too long, which is a benefit to many, though the market sees the most dramatic fluctuations over short periods of time, so short term investments often require a basic knowledge of market trends to be truly worthwhile. A long term investment can quite often be made and then essentially ignored for a considerable amount of time until it has matured, whereas a short term investment could well require you to track it carefully and sell at a very specific time.

Almost the exact opposite is true of a long term investment. These grow in small incremental amounts, often dipping for considerable amounts of time before picking back up again, so if you cant bear to see your money drop after the first month, before hopefully growing again, then these arent for you. Overall though, long term investments offer far greater stability and much lower risk, as long as you are prepared to see the investment out and not be tempted to pull your money too soon; a common mistake made by investors.

In a nutshell, if you are looking for a more profitable alternative to a savings account then long term investments can offer a stable safe haven, but if you are after maximum financial gain in the minimum amount of time (and are prepared to take the risks), then short term investments can be a successful move.About the Author:

Andrew Regan writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.

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