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Long-term vs Short-term investing

3 mins | Beginnner


Short-term investing is focused on trading, where experienced investors time the market to make money quickly - it’s higher risk, and sometimes higher reward. Long-term investing is chilled in comparison, with the focus placed on length of time to grow money, utilising compounding growth and cost averaging to increase your rewards.

Long-term investing is a strategy where you’d hope to see your investment grow over many years, ignoring the value going up and down in the short term. Long-term investing is usually for more than 5 or 10 years, working towards a future goal like a house down payment or retirement. It’s safer due to the average nature of incline in the stock market over time and less risky for beginner investors.

Short-term investing is usually for a year or less. For this strategy, you’ll need to be savvy, as it becomes more important to buy and sell at precisely the right time. Making a mistake can be expensive. 

Which strategy you go with really depends on your goals. 

Tip: For beginner investors, long-term investing can be the better way to go. This is because you have longer to ride the highs and lows and you get the benefit of compounding returns, plus it's ultimately easy, especially if you don't have the ability to time the market. 

When it’s best to choose a long-term investing strategy.

  • You Want Protection From Loss

    A Long-term investment strategy can assist you in riding out volatility or help minimise risk. By focusing on the end result, small or short-term drastic market changes won’t affect your overall investment.

  • It’s your first time

    Trying to time the market and make a quick buck is a complex investing skill best suited for advanced investors. Beginners will be most comfortable and risk-averse to choose a long-term investment strategy, as it will help ease them through fluctuations.

  • Your Retirement Is More Than 20 Years Away

    Long-term investments like stocks have the potential to grow but need the time to do so. With over 20 years of work left, they’re a great asset to building wealth over decades.

When it’s best to choose a short-term investing strategy

  • You want to maximise an opportunity in the market

    If you have short-term goals and are willing to take on risks, then short-term investments will be best suited.

Note: When considering liquidity, market loss is a key factor that should be at the forefront of the decision, as you may lose money by the time you withdraw your cash.

Investing involves risk. You aren't guaranteed to make money, and you might lose the money you start with.
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