Investing refers to putting your funds into a financial asset that gives a potential return over time. It can increase the value of invested funds over the short or long term.
Most individuals consider investing in the stock market as it offers diverse options to invest and grow your money. Based on the research and analysis, investors can choose a financial asset that grows their wealth in the prevailing market conditions. These financial assets can be shares, derivatives, commodities, currencies, bonds, exchange-traded funds, mutual funds, etc. Investing in the stocks of a company gives you a stake in the company. To start investing, you can consider a discount stockbroker that charges low brokerage. A broker with low Demat account charges can help you save significantly on trading charges.
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The Power of Investing
Investing is an effective way to build wealth over the long term.
- From a personal finance standpoint, investing helps you attain financial security in the future.
- The returns you expect from investing are based on your time horizon, the rate of return, and the money you invest.
- Investing in the stock market can help you grow your capital and beat inflation. You need to invest smartly, taking into account the market dynamics.
- The earlier you start investing, the higher your chances of building wealth, and the power of compounding takes effect.
Therefore, to know the power of investing and experience easy investing in the stock market, you require time, patience and a clearly defined realistic plan for your investing objectives. You can start with opening a Demat & Trading Account through reputed stockbrokers like Bajaj Financial Securities Ltd (BFSL). They offer Demat Account along with their unique feature of expert-picked stock baskets for long-term wealth creation, provided in partnership with PickRight. This can save substantial time and effort on research, and you can build an attractive portfolio.
Understanding the Difference Between Long-term and Short-term Investing
Holding Period
- Long-term investing means holding financial securities for more than one year to get expected returns.
- On the other hand, short-term investments are ones that the investors hold for less than a year.
Whether you want to earn immediate profits, or want to invest for the long haul and build wealth, you can decide if you need to focus on short-term or long-term investments.
What Parameters Work For Investing
Volatility
Short-term investors look for volatile securities to earn possible gains. However, the long-term investors do not focus on volatility; they see the long-term growth aspect of the securities.
Short-term volatility is inevitable, and sudden market shifts can favour short-term investors. Sudden market falls can be devastating, but they are temporary. One should note that the losses incurred in the short term become less prominent while considering long-term returns.For long-term investors, the intermittent market downturns do not mean much.
Profitability
Long-term investing is considered more favourable since it spreads the risk and compounds returns over the years. Investors have historically experienced a higher success rate with long term investing.
Most market experts recommend holding stock investments for the long term if your investment horizon allows. As a long-term investor, you should not touch your holdings and obsess over the short-term market trends.
Risk Appetite
Investing decisions depend on your risk profile, future goals and the investment horizon.
Loss of capital is one of the risks in the stock market. Investors should take tests to understand their risk profile before investing.
Besides, know the risk associated with the investment products, and then decide to invest in a financial asset according to your risk profile.
If you have a low-risk profile, you can diversify them into different types of securities and invest for the long term. Long-term investments balance out the risks over a while.
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What are the Best Tools in the Market for Long-term/Short-term Investing?
You invest with the expectation that your portfolio value will increase and thus help you accomplish your financial goals. But you need knowledge and experience to invest in the share market. Investors, especially novices, may seek guidance for investing in the stock market. You can use advanced tools to make your investing journey easy. Among a few useful tools, one is PickRight offered in the trading application of Bajaj Financial Securities Limited (BFSL).
BFSL has recently teamed up with Pickright Technologies, a SEBI registered investment advidor. Now, along with the host of other features in its Demat and Trading account, BFSL customers can access well-researched, customised stock baskets known as “Investpacks”. These are theme-based investment picks to build a long-term portfolio. These curated stock baskets open new horizons for investing and earning gains from shares across the sectors.
Concluding Thoughts
Thus, short-term and long-term investing are two approaches to growing wealth. The amount of investment capital available and your risk appetite can help determine which method works best for you. While long-term investing can help investors to overlook intermittent volatility, short-term investors or traders need volatile stocks to make immediate profits. As a long-term investor, you need to be patient to earn returns over an extended period. If you can afford a certain amount of risk, you can consider short-term investing.