In stock market, what's the definition and difference between short term and long term investing?

Question

As my question indicates, I am a beginner and am trying to get familiar with these finance terminologies. If you an expert in this zone (or at least have some experience), any advice, tips, recommendation ,... would be greatly appreciated.

Answer 1

It depends on individual goal and needs.
Short term: from days to weeks
Long term: from months to years

Answer 2

some stocks are "old faithful"...they are big old companies that slowly grow 5-8% a year, never really jumping up, or going down, and putting money in those companies is almsot like putting it in a bank.
Others are more volatile...may go wildly up or down, often young companies that may make it big (think yahoo if you got in early) or fail completely (think pets.com)

long term investing tends to focus on the long term....if a company goes wildly up and down, but on the average goes up 12% a year, it's far better a long term investment than something that slowly but surely goes up 8% a year. If your stock shoots down 20% in a day, you're not worried, because it's done that in the past, and may shoot back up 20% the next day.

When you invest long term, it usually means you're planning for retirement. When you do this, you will want the higher risk, higher gain stocks for the first few decades, but then you'll want to switch to "old faithful" later on, when you're getting close to NEEDING the money.

Long term investing often means sacking away a few thousand every month or two, knowing it will grow over time. It is important to pick stocks that won't go bankrupt, and important to consider the life of the company, and how it will do in the long run.

Short term investment does not are about the overall long term outlook for the company, but rather, how it will do in the next week. Usually, short term investing is based on news. When atkins started becoming popular, it was a wise move to invest in any company that does meat-related business, because you knew that soon, the stocks would move up...but you had no idea of how that would affect the long term, so once your stock went up 20-30% you want to dump it and look for the next oppurtunity.

Shrt term investing means you're looknig for something that is going to get a quick temporary "push" upwards, then you're looknig to sell it before it slides back down.

Short term investing is a lot like vegas, but the house odds are in your favor. You could pick a loser, and find your investment cut in half.

In fact, it's a lot like horse racing, because you can do a lot of research and figure out which ones are likely to be winners, and which ones losers...if you get word that one "horse" is greatly underestimated, you put your money there.

The fact that each "buy" and "sell" costs money, also means that you can't play a "small" table. If you buy $1000 in stock, and there is a $20 commission per trade and the stock jumps 5% in a day, and you sell, you start with $1020, your $1000 becomes $1050, and you end with $1030.

Answer 3

This is a fuzzy area. For saving for retirement, I would say anything under 5 years is short term, because when you get that close to retirement, you need to think "short term" to make sure you money doesn't evaporate in a 2 or 3 year bear market.

Otherwise, if just for general investing, I'd say anything shorter than a year is short term and anything longer than a year is long term.

Answer 4

Short term investing refers to invest money to stock for a period less than 5 years. Long term inveseting refer to invest money to stock for a period of 8 years and above. People who likes short term investing is usually call speculators whereby long term investing is called investors.

Speculators, they like to buy low sell high to earn a certain percentage of profits. Thus they have transactions of buy/sell more than a investor where they only buy the stocks for one time and leave it for 8 years or more.

Answer 5

Investing is a broader term where as trading is just a form of investing. Trading deals with buying and selling of shares where as investing means putting your money sensibly. No doubt investment is more feasible for steady growth as it diversify the risk....

Answer 6

also, if you sell stock, there are short term and long term capital gains/losses. long term applies to stock held 1 year or more before its sold. tax due on long term capital gains is less than for short term capital gains.