After researching, listening to finance podcasts, and reassessing your budget, you’re finally ready to take the plunge and invest some coins into the stock market.
Given the current downturn in the stock market as traders monitor the Russia-Ukraine war, it can be nerve-wracking to know where (and when) to start.
Should you be investing for the short-term à la everyday investors, or putting your money into your portfolio for retirement? What’s even the difference?
Let’s break it down.
When you invest for the short-term you’re usually not looking to hold those investments you make for more than five years and it might even be less time than that – maybe a day or for a few months.
One common reason to invest for the short-term is that investors are looking to find value in particular companies or time a dip (or rise) in the market. If you are looking to invest for the short-term it’s important to make sure you invest time into doing your research before you buy and sell on the stock market.
Your returns from short-term investing mainly come from short-term changes in the price of your investments – which can go up and down.
On the other hand, long-term investing is all about the overall time that your investment is in the market, not timing the market. Investing for the long-term means your investment will grow over many years through the ups and downs of the market.
A common long-term investing strategy is to invest a regular amount of money into the market over many years. This is called dollar-cost averaging and means that if you put in money when prices are high as well as low, over time your stock purchase price evens out.
Your returns from a long-term investing strategy come from changes in the price of your investments, any dividends that are paid and also the power of compound returns. As you are investing for the long-term even investing small amounts regularly over a longer period can build up a nice investment portfolio. For example, with the Sharesies platform, a person can begin investing with as little as one cent.
But because investing involves risk, even some long-term investments drop in value for months (or years), and investors need to decide whether they’re ready to pull their money or wait for the market to regulate again, a potentially costly exercise.
Overall, there’s no right or wrong way to invest. Whether it’s short or long-term, figuring out the right investment strategy for your lifestyle, goals, and time horizons is a must. Thanks to tools like auto-investing, long-term investments are great to “set and forget” (remembering to review when circumstances change), while short-term requires you to play and predict the market a bit more. The only way to learn? Get in there and find a strategy that’s right for you.
Please note that the information in this article is general in nature and shouldn’t be construed as financial advice.
Keen to get started? Brush up on your knowledge with the Sharesies X PEDESTRIAN.TV ‘Unlikely Investors’ podcast. You can sign up to the Sharesies platform and use promo code “UINVEST” for $10 in your account, ready to invest. Terms apply.
All investing involves risk. T&Cs and fees apply for use of the platform provided by Sharesies Limited. This article is sponsored by Sharesies AU Pty Limited, as an authorised representative of Sanlam Private Wealth Pty Limited (AFSL No. 337927). This is not financial advice and the information provided in this article has been prepared without taking into account your objectives, financial situation or needs. Speak to a licensed financial advisor for advice specific to your circumstances. Image shown does not represent a real portfolio.