Investing Short term vs Long Term 

There are some people who enter into stock trading with the idea of making some fast money.  They invest in stocks thinking that they will make money on each investment in a short time. Stocks may not the best investment option for investors who have short term rewards in mind.  

If you are thinking of investing in stocks the best option may be to consider accumulating funds over a long period of time.  Consider investing for future needs such as for retirement, a nest egg, travel, a new home, etc. 

When you are investing in the stock market, both short term investments and long-term investments come with risks attached.  Nothing in the stock market is guaranteed.  Today may be a very good day in the market with lots of gains.  However, it could also be a very bad day in the market with lots of losses. 

In terms of long term investing, statistics show that over a period of 20 years these types of portfolios have not lost in the stock market.  The returns for these long-term investment portfolios have averaged about 10 percent.  These accounts all have a broadly diversified portfolio of stocks. 

Making short term investments in the stock market can be very risky.  The market is going to go up and then it is going to go down.  If you are only thinking of investing for a short period, this is probably not a good option.  Short term investing is not a good option if you are nearing retirement age and are just beginning to invest in stocks.  In this instance, the best option is a protection against inflation.  Rather that investing short term in stocks consider investing in stable investments such as bonds and other cash instruments.  These types of investments offer more security than stocks in the short term. 

Many people think that a short-term investment means one year or less.  In terms of stocks, short term is considered to be five years or less.  A good rule to keep in mind is that if you are going to need your funds within the next five years you should stay away from stock investments.  Short-term stock investments do not make any sense unless you plan to be an active trader. 

The average time for a down market is one year, but it has at times lasted much longer.  A long-term investor may feel the downtime is lasting a lifetime, but for the long-term investor it will pass.  On the other hand, the short-term investor may lose a lot depending on the market fluctuations.   

There are many great opportunities for making money in the stock market, but it can be devastating for a short-term investor.  If you are going to need your funds in a short time, then choose investment options that are more secure and protected.  If you can afford to risk the money, then by all means consider short term stock investments. 

It is true that with short term stock investing you may get lucky and make a fortune.  However, it is also true that the risks are high and you may end up losing a great deal of money.