Long Term Investment vs Short Term Trading; Equity(Stock) vs Gold

Why Long Term Investing Is Better Than Short Term Trading

Source: Wikipedia

If we look at the Image Above we can see that from 1991-2015(25 years) the Sensex has climbed from levels of around 1500-1700 has moved up to 30000(About 1750-2000% higher) in spite of more than 50% correction in 2008-09. This certainly tells us over a long period of time the money made from investing will be much higher than that made buy trading.

Here are examples of few stock which have given high returns:

1) Federal Bank Has Returned Over 8200% In 15 years- (Price: 1.86-154) (Year: 2000-2015)

2) Hindutan Zinc Has Returned Over 23750% In 15 years- (Price: 0.8-190) (Year: 2000-2015)

3) HCL Tech Has Returned Over 4000% in 13 years- (Price: 25-1058) (Year: 2002-2015)

Benefits of Long Term Investing

Conversely, long term traders incur much fewer trading fees, since positions are held for a long period. Short term traders see long term investing as boring, and quite frankly, that’s just fine for most traders, especially inexperienced investors. However, even many very experienced and professional investors buy in to the long term strategy. In fact, American investor Warren Buffett (the richest man in the world) has said that his preferred time to hold a stock is, “forever.” He is also quoted as saying, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” In other words, Buffett believes in long term investing. He sees market fluctuations as opportunities and he has made billions by purchasing stocks of strong companies that everyone else was selling out of fear and holding them for a long time.

Long term investors should seek out companies that have a proven track record of stability and growth. While newer companies can still be good options for long term growth, there is less risk involved when a business already has a proven track record. Another good option would be a stock that has a history of paying dividends, especially one that increases dividends on a regular basis. These types of companies have proven their commitment to dividends and typically will continue to pay back their shareholders every quarter just as they always have.

Many investors will benefit from the relative stability that long term investing offers. New investors should definitely focus on long term prospects rather than watching every little fluctuation in the market. This is not to say that you should buy a stock and hold it for twenty years no matter what. If something substantially changes with the company or the market as a whole, then you should adjust accordingly. However, trades should be made with your overall market strategy in mind, not just the day to day ebb and flow of the market.

Conclusion Based on Historical Data

Before the year 2000, the stock market had not had a negative 10 year period since the 1930’s. Since 1950, there has never been a negative 20 year period. This is why long term investors need to keep in mind the real goal and a truer definition of “long term.” For those who can master the practice, however, short term trading can be very profitable. Some people make careers and millions of dollars from trading stocks in as little as a few minutes. The key to short term trading is lots of research and forming a solid plan, then following through. For the average investor, there simply is not enough time to properly research, create and implement a proper short term investment plan. Trying to guess what the market will do is a recipe for financial disaster. If you are considering short term investing, please do so with only a small portion of your overall portfolio capital and do so with extreme caution. But for most investors, a longer term approach is absolutely the way to go. (Source: www.buyshares.org)

Here is an Image which Shows Compound Annual Return Of Gold And Equity

Source: Equity Master

Please See The Following Video To Know Why Warren Buffett Prefers Equity(Stocks) Over Gold