Short-Term Investing: Why You Need to Try It
In any conversation about investment, the topic of long-term gains is often discussed. Advisers urge you to look at the long view, friends brag on their 5- and 10-year averages, and on and on.
The vibe is so overwhelmingly far-looking that it’s very easy to forget that you can make money in the stock market over a very short term.
How short? Longer than day trading, where an investor attempts to turn a profit within a day’s activity, but usually just a few days. It’s called a swing trading strategy, and it is based largely on the natural variability of market prices and our ability to predict them using several different strategies.
The how and when is best left to an investment expert to discuss in the context of your overall investment education, but let’s look a little more at why. What is inspiring investors to go with swing trading, and how is it beneficial?
Getting A Head Start
You’re fresh on your first high-dollar job, and you want to quickly build a nest egg to start toward your retirement. You have no desire to sit around watching your investments collect dust for ten years; you want something to kick-start them.
Swing trading can make that possible. Your initial investment can take a quick bounce and develop into something more substantial. You can then either leverage that money into new swing trades, or pull it into a more traditional long-haul approach. Either way, you have a head start on your retirement assets.
Maximizing The Superiority of Stocks
Some investors believe that as long as their long-haul investments are generating yields a little better than treasury bills or municipal bonds, they’re happy. These investors are very risk-averse and don’t want to gamble.
But if T-bill returns are what you’re after, why wouldn’t you just buy T-bills? The whole benefit of the stock market is that you can get better returns than what most of the more conservative instruments will give you, so swing trading gives you the chance to capitalize on the stock market’s power to grow your money quickly.
Increasing Your Attentiveness
Sometimes a move of a few shares or a few thousand dollars can yield a big return down the road. The key is to be watching for the signs and knowing what they mean for your investment strategy. Be assertive; too many investors shrug off the signs of an approaching hiccup.
For the investor who relies heavily on the long-term plan, this can be costly. Most such stockholders take a cursory glance at most each day. When you are planning for the short-term profit of a quick move, you are reading. You are studying, researching, and reviewing, and while you make your short-term money with your quick turnaround stocks, you may also detect things that can help you for stocks you plan to hold longer.
Freedom To Wait
When you’ve sat on a stock for 15 years, you are past waiting on it to perform. If it hasn’t made you the money you expect by that time, you don’t have enough years before retirement to let it catch up.
In a short-term move, you can expect a quick profit, but if it doesn’t materialize, you have time to wait on it. Should a big splash not take place in the first week, you can wait another, then another, and you may even change your view toward that 15-year stock.
The point is that a short term actually plays in your favor when the stock doesn’t do what you expect, and when it does, the short term puts money in your hands quicker.
Just as any investment strategy, swing trading isn’t totally risk-free. Before putting any of your money into any investment, you need to get expert advice. Just keep swing trading in mind as an option, and make sure your adviser factors it into the equation.