The Pros & Cons Of Short Term Investments
Typically, when the topic of investments comes up, you think about investing in an asset, then keeping it for as long as possible. Your 401k or other retirement funds are examples of this, as is investing in company shares and leaving them for decades. These are long-term investments as you have no intention of selling them any time soon.
So, a short-term investment is the opposite; it’s something you invest in and sell within a reduced time period. Instead of a few decades, it could be a few days, weeks, or hours!
Short-term investments can be beneficial, but they can also have a few drawbacks. Here’s a couple of each to let you know if this is a good idea or not:
Pro: Quicker access to money
With long-term investments, you usually have to jump through hoops before you can get your money. Your cash is locked away, and you have to wait until the time is right to access it. With short-term investments – like CFD Trading or Forex – you have quicker access to your money. You can gain your earnings whenever you need them!
Pro: More money can be made
It’s no coincidence that traders make a lot of money. When done correctly, you can earn so much money from short-term investments. It’s all about having the right strategy and knowledge, plus a bit of luck as well. Certainly, it is possible to make more money from short-term investing than if you took the long route.
Con: Much higher risks
The downside of short-term investments is that the risks are much higher than their long-term counterparts. Yes, you can make a fortune in the short term, but you will be running a very high-risk strategy to do so. Big gains can be made, but so can big losses. All it takes is one little issue to cost you a fortune and send your investments down the drain. With longer-term investing, you have more margin for error. A dip in the market is unlikely to affect your investments in the long term, while they could cost you a lot of money in the short term.
Con: More effort required
The second drawback of short-term investments is that they require far more effort than long-term ones. With a long-term investment, you can just make a purchase, then do nothing for as long as you like. A lot of people invest in stocks, then just sit on their assets until it’s time to retire, finally cashing them in. If you go down the short-term route, you have to be active in watching the market, spotting trends, knowing when to buy and when to sell, and so on. It’s far more effort than the long-term option, so keep that in mind.
Overall, short-term investments are a good way to earn money rather quickly, provided you know the risks and are well-educated. For more of a passive income that you don’t have to constantly worry about, consider long-term investments instead.