Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 257

Long/Short-Term Investor

Different people have different tastes when it comes to holding periods of their investments. Some like to invest in a company and hold their position for a very long time (if not forever), while others may get in and out of positions in seconds. Still others have a medium-term approach or use a combination of all lengths depending on the stock they invest in. If you have been around the investment scene for a while, surely you have heard of long-term investing. It is hard to put a number on what constitutes a long-term investment, but just as a guideline, holding a stock for more than two years could be considered a long-term investment. Opinions of course differ widely here. Some may view this length to be 10, 20, 30, or more years. Others may view six months as long-term investing. Anywhere between four months and two years could be considered medium-term investing. That leaves us with short-term investing, which would be holding a position for less than four months at a time. The super short-term investment may not even last for a day.

Long-term investing is what we have been advised to do by many (including our parents) as the only prudent way to invest. I don't disagree with this buy-and-hold mentality. Time has worked wonders for so many people who have patiently invested their money and have seen their investment grow to a sizeable amount over the years. Why long-term investing? Consider the following two facts:

  • A regular monthly investment of $500 with an average annual return of 10% (conservative estimate), would balloon to $1 million in about 30 years.
  • Studies show that most stocks rise significantly within two defined periods during the year. Long-term investors would surely catch the stock in those periods.

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