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Long Term Versus Short Term Investing in the Stock Market in India

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Investing in equity means buying a percentage of ownership of a particular company. While long-term investment in the stock market in India works best for wealth creation, there are many who maintain a short-term perspective and engage in frequent buying and selling of stocks.

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

Before we proceed further, let’s look at some interesting 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 quite self-explanatory, and when it comes from an expert, there is absolutely no reason why any stock market investor should not take it seriously.

Both long-term and short-term investments in the stock market have their own advantages and disadvantages.  Let’s take a detailed look at both methods of investing to understand which style of investing 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. In long-term investment, the capital is locked for the entire duration of the investment.  Due to fewer transactions, the overall cost of investment 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 for anywhere 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 very short 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 history of the stock market in India reveals that markets have always been stable over the long run, as compared to high volatility in the short term. It isn’t very easy to predict the market in the short term as there are too many economic, political, and global factors affecting it. Irrespective of the market conditions, long-term investments in quality stocks have always generated good returns.

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