Short term investments vs. long term investments for making money in stocks

United States, 15th September: Stock market is, no doubt, highly volatile and unpredictable as ever.

United States, 15th September: Stock market is, no doubt, highly volatile and unpredictable as ever.

However, by sticking to a few basics, one can make money in the stock market even in turbulent financial times.

Let see what to do and how to do—

Short term investment can spell disaster—Seeing the upheavals in the stock markets, it is best to say that short term investment can prove to be a bad decision for anyone. The shocks in the US stock market had been not just painful but also quite long.

So, the best bet in such a tough financial era is to avoid short term investment in the stock market.

• Take risk, gain profits—Risky it may seem, but the truth is that the risky investments tend to offer higher profits than the contemporary safer ones with the only exception being when they fall flat to the ground.

The reason for safety in risky investments is that those investing in such stocks want a higher return for the risk involved. In fact, that’s the reason why short-term bonds are less profitable than long-term bonds.

• Bond prices fall when interest rates rise—Rising interest rates seem to spell bad luck for bonds. And the reason seems quite obvious since those purchasing bonds will not be paying the same amount for the existing bond having a fixed rate of interest.

Do you know why? Well, that’s because fixed interest rate on any new bond will be more profitable since the rates have soared upwards.

• Investment in US treasury bonds-the best bet—Investment in US Treasury bonds is, undoubtedly, the safest investment. Its hundred percent risk-free since the government can pay them off by printing more currency, if needed.

• Inflation- a big risk for long-term investments—Stock markets have the history and a tendency to fall and then rise and the phenomenon is continuous, meaning if the market falls, don’t despair because it is set to rise again and vice-versa.

But, never commit the mistake of investing for long term when the inflation has touched new highs.

• Exercise diversity while investing—Its best to invest in different kinds of investments rather than pooling your money in a single or a handful of investments. That is because if some of the stocks go down, the others might move up.