Investing in securities has become a popular way to make money today due to its high profitability. Despite the fact that this sector is lucrative, it is never simple. To maximize returns, investors must first choose the best investment approach based on their particular circumstances and the market's overall trend. Short-term investment and long-term investment are the two most prominent approaches used by investors.
What is short-term investment?
The fundamental element of this strategy, which is a very brief investment time, usually less than one year, can be deduced from the name. In which, technical analysis, a trading discipline that uses price trends and patterns on charts to evaluate investments and uncover trading opportunities, is frequently used by short-term stock investors to trade arbitrage and profit in a short period of time.
Short-term investors are solely interested in the increasing or declining value of the shares they invest in. Because of the short time frame, the growing firms are not significant enough to have an impact on the market's overall worth, as a result, waiting for dividend profits isn't an option. They frequently switch between opportunities, selling out of stocks that are no longer profitable, and continually looking to buy shares of companies with greater potential. Short-term investors profit mostly on price differences between securities sold on the market.
This form of short-term stock investment is also known as "surfing". The method of "surfing" is quite simple, you see a profit, then buy and push back to the market when the price is high. Conversely, you can also sell as soon as the price drops to avoid losses.
Advantages
The most significant benefit of short-term stock investing is that it allows investors to swiftly recoup capital and profit, save time if properly invested, and reinvest in new opportunities. This is also why some investors prefer to "surf" the market rather than invest in long-term securities.
Drawbacks
Short-term investing necessitates investors' ongoing analysis and monitoring of the market, always on the lookout for a more desirable stock to replace one that is underperforming. Because the value of securities is more strongly affected by numerous market economic factors in the near term, there is a risk of losing everything if you make the wrong decision. As a result, the short-term investment approach is deemed to be riskier than the long-term investment method, despite the fact that the potential return is undeniable.
Recommendations
Be well prepared: Investing in short-term securities requires investors to understand, know how to analyze and predict accurate stock price trends. Because of the short investment period, investors need to be quick to seize the opportunity.
Have a strong mind: Because the market has many unexpected movements every day, investing in short-term securities requires a "steel" spirit. Allowing the events or opinions of a small group of people in the market to affect your thinking is not a good idea. It's easy to make poor decisions when the mind isn't solid.
Quick but accurate: If the direction goes against your prediction, you must always be prepared to cut your losses. This is also a means of assisting investors in preserving their wealth and identifying better chances. You always have to control your greed and fear to not get caught up in the market and make more accurate trading decisions. Try to set up stop-loss and take-profit levels and adhere to them strictly. This prevents both significant losses and profits being taken too soon.
Conclude
Short-term stock investing is one of the most rewarding and time-efficient investment strategies. However, in order to be successful, you must master your emotions and have a solid foundation of knowledge and experience, otherwise, there will be a significant loss.
Sources:
Team Finhay. (2021. October 5). Đầu tư chứng khoán ngắn hạn? Nên hay không? Finhay. https://www.finhay.com.vn/dau-tu-chung-khoan-ngan-han/
BSC. (2019, March 26). Nên đầu tư chứng khoán dài hạn hay ngắn hạn? BSC. https://www.bsc.com.vn/tin-tuc/tin-chi-tiet/653914-nen-dau-tu-chung-khoan-dai-han-hay-ngan-han/
BSC. (2019, March 26). Đầu tư chứng khoán ngắn hạn. BSC.
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