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Long Term Versus Short Term Investing in Stock Market in India

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Investing in stock market? Short Term vs Long Term Investment - which 1 is better

Investing in equity means buying a percentage of ownership of a particular company. While long-term investing in stock market in India works best for wealth creation, many maintain a short-term perspective and frequently buy and sell stocks.

Experts suggest thorough research before you invest or decide on your investment strategy. What is suitable for one investor may not work for your goals. Therefore, you must consider your financial objectives and the risks you are willing to take before investing.

Before we proceed further, let’s look at some exciting quotes on investing by one of the world’s greatest investors, Warren Buffett.

“Calling someone who trades very actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic.” 

“Stock market is a device for transfer of money from the impatient to the patient.”

“Only buy something that you would be perfectly happy to hold if the market shut down for 10 years”

The above quotes are pretty self-explanatory, and when it comes from an expert, there is absolutely no reason why any stock market investor should not take it seriously.

Investing in stock market

Long-term and short-term investments in the stock market have advantages and disadvantages. Let’s take a detailed look at both investing methods to understand which style suits you better.

What is a long-term investment in the stock market?

An investment of 4 to 5 years or more is generally considered a long-term investment. This is because, in long-term investment, the capital is locked for the entire investment duration. In addition, due to fewer transactions, the overall investment cost is low as brokerage charges, and transaction taxes are applicable only twice, i.e. while buying and selling.

What is a short-term investment in the stock market?

Short-term investment can range from investing between a few days, weeks, months, or one or two years. Intraday trading and buy today and sell tomorrow are some of the prime examples of short-term investment in stock markets.

In the short term, the capital is locked for a concise duration. So, the investor has the liberty to execute multiple investments. However, with frequent buying and selling, the overall cost increases as brokerage charges and transaction taxes are applicable every time the investor buys and sells stocks.

Now let’s see the difference between these two types of investment which will give you a good idea of what would work best for you.

Click here to view a detailed presentation on the differences between long-term and short-term investment in the stock market in India.

The stock market history reveals that markets have always been stable over the long run, compared to high volatility in the short term. Of course, predicting the market in the short term is difficult as too many economic, political, and global factors affect it. However, long-term investments in quality stocks have always generated good returns irrespective of the market conditions.

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