Long Term Versus Short Term Investing in the Stock Market in India
Investing in equity means buying a percentage of ownership of a particular company. While long term investment in the stock market in India works best for wealth creation, there are many who maintain a short term perspective and engage in frequent buying and selling of stocks.
Before we proceed further, let’s take a look at some interesting quotes on investing by one of the world’s greatest investor, Warren Buffett.
“Calling someone who trades very actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic.”
“Stock market is a device for transfer of money from the impatient to the patient.”
“Only buy something that you would be perfectly happy to hold if the market shut down for 10 years”
The above quotes are quite self-explanatory, and when it comes from an expert, there is absolutely no reason why any stock market investor should not take it seriously.
Both long term investment and short term investment in the stock market in India have their own advantages and disadvantages. To understand which style of investing suits you better, let’s take a detailed look at both methods of investing.
What is long term investment in the stock market in India?
An investment of 4 to 5 years or more is generally considered as a long-term investment. In long term investment, the capital is locked for the entire duration of the investment. Due to fewer transactions, the overall cost of investment is low as brokerage charges, and transaction taxes are applicable only twice, i.e. while buying and selling.
What is short term investment in the stock market in India?
Short term investment can range from investing for anywhere between a few days, weeks, months or one or two years. Intraday trading and buy today, sell tomorrow are some of the prime examples of short term investment in stock markets.
In the short term, the capital is locked only for a very short duration. Hence the investor has the liberty to execute multiple investments. However, due to frequent buying and selling, the overall cost increases as brokerage charges and transaction taxes are applicable every time the investor buys and sells stocks.
Now let’s see the difference between these two types of investment which will give you a good idea of what would work best for you.
Click here to view a detailed presentation on the differences between long term and short term investment in the stock market in India.
History of the stock market in India reveals that markets have always been stable over the long run, as compared to high volatility in the short term. It isn't very easy to predict the market in the short term as there are too many economic, political and global factors affecting it. Irrespective of the market conditions, long term investment in quality stocks have always generated good returns.
While the Nifty delivered a return of 72.93% during a 5 year period between Apr 14-Mar 19, Research & Ranking’s model portfolio has delivered a whopping 400.53% returns during the same period. Check it out here.