Stock market winners like Warren Buffet have done long term investing again and again which proved consistent success in the market. They even made more profits than the indices could have given. Does long term investing really give more than short term?
Many Stocks make their biggest moves in a short period of time
Many stocks make their biggest changes in a really short period of time. If you invest exactly or even approximately around that time there will unimaginable gains for the investor. That too in a short period of time. When you invest again in another stock in a similar condition, the gains will compound. Over time the returns will be unimaginable. The thought of that simply tempts anyone to attempt once. But few people understand why that is only imaginable and not real. Definitely this short term thing won't pay better. Some one may wonder why this is like this.
Then short time should be much better
Even though stocks may make big moves within a short period of time, there is less certainty about when they will make that move. Rather there is high certainty of ending in losses before making any profits. We cannot and should chase stocks. That is the reason why many consultants appeared from nowhere to guide the individual investors rather than investing by themselves.
Problem with short term
There are two problems with this. One is that you cannot really invest huge amount of money in a single stock without becoming a promoter of the company. So the consultants target individuals rather than mutual funds. Another is that there is less certainty of big moves in stocks. So the consultants do not want to take that risk. They rather put it on the individuals. Many individuals so that they make lot more as fees accumulate.
Why long term
Then the only choice seems to long term investing. In fact you can recover your losses you could have made with the short term decision if only you decide for the long term. Moreover the uncertainty can be eliminated by expanding the time window. Within a long period of time, that short period of time where the biggest moves occur will be definitely located somewhere to reduce the uncertainty. And if you invest real money you will realize that the gains you made are real and worth the long term. Because in the short term you will chase and with less certainty accumulate real losses. So in reality long term pays much better.
Conclusion
Long term investing covers the short term as well to give the profits you can imagine. But the other advantage is that you will avoid short term losses. With short term there is less chance of tapping a big move but rather there is a high chance for accumulating losses. If you see that a stock you purchased does not seem to make big move over time you end up selling for a loss. Unimaginable profits cannot be made in reality unless you invest for the long term.
