Short-term vs Long-term

Every one of us has tested hands on intraday trading, but hasn't really achieved anything big. With intraday/ short-term trading the pattern is like, we earn and we lose and sometimes the loss is very big. And that is the case with everyone, even the highest knowledgeable minds of financial markets. With experience, some traders could only predict the follow-up of a particular trend, like if a stock is going to show a positive or negative trend for a while. But apparently, no one can guarantee future performance of a stock by analyzing past or historic data. As a matter of fact, all intraday trades are leap in the dark, it is about luck to avail profit. If you are entering a short trade, no matter how good the stock is performing, you have a higher chance to book loss. All in all, intraday trading is a game of speculation.

But, what is the solution then?

How do we earn on a daily basis or at least weekly. Well, if you read my last post I have talked about two things:-

1.) Calculation of your satisfactory return.

2.) Having an active source of income.

I told you so because with active income you don't have to be completely dependent on market and specifically on short-term trading. To be clear, I am not necessarily talking about having jobs. Do anything of your interest which could make you earn money. From giving tuition to writing blogs anything will be fine as long as it pays you. Because then, you'll have something to think about other than market & it will enhance your confidence when you plan to enter in any trade.

Market has potential to convert your small investments into fortunes, you just have to seek for the right investment. Creating an investment plan may appear as a tedious task, but actually it is no rocket science.

If you are not willing to own a stock for 10 years, don't think about owning it for 10 minutes either. 

- Warren E Buffett

The best & simplest type of investment is Long-Term Investment. This is like hiring the market itself to work for you. It will make you earn money even while you sleep. As it said, it takes no special knowledge to earn a decent money from market but it takes a lot of effort & analysis to book loss.

Now, you may think long term investment is fine but in which stock because there are plenty. So, the answer is whatever doesn't go out of existence. I am talking about INDEXES. There is a very brilliant thing about index, even though the whole market crashes index never goes out of existence. If you have this confidence on any other stock, start investing in it for long-term as soon as possible. Because 10 years from now our friend inflation will guarantee us a good profit on any stock that survives that long.

I could give you hundreds of examples where this technique is successful. Actually, it never fails. But, I leave it on you to see the historic chart of past 10 years of any index/ stock and deduce how much profit you could have made, till now. Keep in mind the bigger the investment, better will be your returns. This is your today's exercise.

Keep visiting this site, for upcoming articles where I will discuss about making a proper investment plan, power of compounding, analysis paralysis, ETFs, IPOs and all basics which are necessary for being a smart investor.