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Finance

Long Term Investing vs Short Term Investing

Managing your investment money can be stressful. If you have experience in investing, you will understand the ups and downs in a market.

Euphoria & Depression

Whenever an asset increase in price, you will have the feeling of euphoria and want to get a piece of the action. Fear of missing out kicks in. Everybody starts to get enthusiastic all of a sudden. The market is great, everyone is happy.

Whenever an asset decreases in price, you will feel like it is the end of the world. Feel like everything is crumbling down, like the world is coming to an end. Everyone you do is wrong. You have wasted a lot of time, energy and money.

Market emotions

If you are in it for the long haul, short term market fluctuations should not be a big of an issue to you. Always think about the fundamentals, the long term. Price can be irrational, it can go down beyond your expectation when panic selling occurs. However, always keep in mind to remember about the long term fundamentals. What you believed in an asset, and continue to believe. What has changed? If nothing has changed and fundamentals improve but stock price decrease, maybe it is time to buy some more at discounted prices.

Short Term Pain

Investing can be extremely stressful. One moment you feel like you are earning, the next you feel miserable having your portfolio down 25% in a matter of days. Always keep your emotions in check. You are not worth according to how much your portfolio is worth. Relax and take a break.

Sometimes short term loses can cause you to doubt your long term goals. What if the price does not rebound? What if it all goes down to zero? Always stay focus and never doubt on yourself. You have already done all the research, the hard work. Things may take some time to recover. Give yourself some time.

Short Term VS Long Term

Ask traders all over and you will learn that most short term traders lose more in the long term. Long term investors plan ahead and stick to their plans. Strategies such as dollar cost average and buy low sell high may seem easy to learn, but it is extremely difficult to have the discipline to practice. It takes a lot of will to keep buying in a falling asset.

It is not easy to buy when the price increases or buy more when the price falls. Whenever an asset rise in value, you buy a little less piece with the same dollar amount. When an asset decrease in value, you get to buy more piece of the asset with the equivalent dollar amount.

It may seem easy, but trust me, when emotions kick in, it is more difficult than you think. The mind can play all kinds of trick on you. You will think, what if after I buy, the price falls dramatically. Or what if I do not buy, and the price rises to the moon?

What if I sell and the price rises exponentially? What ifs. It can hurt a person emotionally in the short term. Therefore investing in long term with a set fixed of rules is a better strategy. Always be disciplined to buy with a fixed dollar irrespective of the price of the asset.

If the price increases when you buy, great. If the price falls, okay, think long term in the future. It does not matter whether you purchase at $1.00 or 1.20 and the price falls to $0.50 but shoots back up to $100 in 10 years time. Just an example. Market can be irrational more than you can stay rational.

So invest long term. Give yourself a break, and stop stock checking the price every 5 minutes or so. It does not really matter in the longer future. Take a break, take a stroll in the park, go for a swim or whatever. Just do not check the price every waking hour of your life. You still have a life to live. Enjoy.

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