If you’re new to the investment game, then you might not know there are lots of different methods of investing your money. More often than not, these methods are split into two different categories; short-term or long-term investments.
Today, we’re going to explore both of these categories and figure out if one is better than the other.
To start things off, let’s take a look at short-term investments. What are they? What are the strengths and weaknesses of this investment option? Answering the first question, short-term investments are investments you make with the aim to sell them quickly. They can be in your possession for a few days or just a few hours.
There are plenty of examples of short-term investments such as forex trading, stock market trading, and even digital currency trading. The forex market is open all day long, which means the opportunities for quick trades are always there. Many currency pairs can fluctuate in value within 24 hours, which makes them ideal for short-term trades. The stock market is interesting in that many assets are suitable for both long and short-term investments. In this scenario, you’re looking for ones that are a bit unstable and move around in value quite a bit during the day. Anyone that’s learned how to invest in bitcoin will tell you that the price of this digital currency – and others – can change a fair bit during a day/week. You can earn a couple hundred dollars during one single day of bitcoin trading if you’re smart and on the ball.
Strengths/Weaknesses Of Short-Term Investments
Naturally, this method of investing has a lot of pros and cons. The obvious pro is that you can make lots of money, fast. After a day of trading, you could earn a profit of a few hundred dollars, maybe even more if you’re trading with lots of money.
A lot of short-term investments also require hardly any money to start. You don’t need to spend big to earn money in a lot of the short-term markets.
With regards to the weaknesses, there is one main thing that stands out; unpredictability. The nature of this method relies on fluctuating prices. However, if you’re not careful, you can suffer big losses during a day if you buy something that drops in price. It’s also a very hectic investment method, and you need to set aside lots of time to do it every day.
On the opposite side of things, we have long-term investments. As you can probably tell, this method of investing is very much different to short-term investments. With this concept, you invest your money in assets that grow over a long period of time, with very little risk.
The most obvious example of this is property investment. However, as mentioned earlier, you can invest in stocks that are built for long-term growth too. Investing in things like gold, land, and a retirement fund are also examples of long-term investments. Properties generally tend to appreciate over the years, as does gold and land. Certain stocks will slowly grow and remain stable, while a retirement fund is a low-risk way of building money over time.
Strengths/Weaknesses Of Long-Term Investments
The strengths and weaknesses of this method tend to be the opposite of the short-term strengths/weakness. A major positive of long-term investments is that they carry very little risk. It’s harder to lose your money, and you don’t have to be as actively involved. You can invest, then sit back and watch your money grow.
The main weakness is that it can be a long time before you see any profits. While the short-term investors are making money every day, you have to wait a much longer time before you cash in your investments.
Is there a winner here? It depends on how you want to invest and make money. If you have time to commit to the busy short-term game and want to invest for a living, then that method definitely comes out on top.
However, if you want to just invest in something to build wealth over a long period, long-term investments are the winner for you. In general, people invest long-term when they want to earn money for retirement.
The whole point of this piece isn’t so much to see which is best, but more to showcase the two different categories. It’s clear you have two completely different paths to go down, but it’s also clear that they’re both great options and you can make money either way!