Value investing or intraday trading, which one is better?
There are thousands of books and millions of quotes that tell the importance of long term investing. The greatest investor Warren Buffet has always believed in long term investing and he says if you can’t hold stock for the next 10 years then don’t hold it for even 10 minutes. While many investors like Warren Buffet or Graham Bell believe in the power of compounding, on the other hand, many people believe in short term market strategies to make money.
There are multiple trading strategies like day trading, swing trading and a lot more through which short term investors make money. Investors like Warren Buffet have generated massive wealth just using the power of compounding. But now the question is, is long term investing the only way to make money in the financial markets? Is it good for everyone or should I also try short term investing strategies? Well, we have got you covered in this article. We have covered everything about value investing as well as intraday trading.
What is value investing
When investors invest their money for more than 1 year it is called long term investing. When you enjoy the shade and fruits of a grown tree it’s someone’s efforts which you are enjoying.
That’s what long term investing is proper analysis, power of time and compounding. Long term investing with proper research can help you create wealth. Long term investing includes a fundamental analysis of a company. It consists of the study of the financial statements of a company and forecasting its growth in the long run.
Benefits of long term investing
Higher probability of growth
In the long term, investing your money works for you. You must have heard examples like 1000 invested in this company 10 years before would be 5 lacs today that’s what growth in the long run means. The stock market has its ups and downs but it never gives negative returns in the long run. If you study the charts of market indexes in the period of 5 to 10 years it has given great returns to the investors. If long term investing is done with proper planning and after building an adequate emergency fund one can get great returns in the market through the power of compounding.
Less risk
“You must have heard Risk hai to Ishq hai. “ But if you are scared of taking risks then long term investing is for you. In the short run stock markets, mutual funds are very volatile and also manipulated by daily happenings. That’s why there is a high risk included in short term investing. But in the long run, companies tend to give positive returns if there is a good analysis behind it. So there is relatively less risk included in long term investing.
Tax advantage
There is a saying every penny saved is every penny earned. Saving tax is also part of a good investment strategy. There are multiple tax deductions available on long term capital gains. Long term capital gains up to Rs.100000 are exempt from capital gains tax and any amount above 100000 is taxed at the rate of 10%.
No need for daily study and analysis
Short term investing or trading requires daily monitoring of the market and study of various charts and graphs. Trading is a full-time job that requires complete attention during market hours. On the other hand, long term investing doesn’t require daily analysis or study. Individuals can do long term investing just by analysing the financial statements and observing companies performance. So it is easy to do a long term investment as it is not time-consuming and doesn’t require full-time attention.
Provides passive income
If you invest in stocks or mutual funds for the long term then it also provides a dividend. Dividend creates passive for you, multiple companies offer good dividends like ITC or TCS.
Less trading fees
If you invest in the short term multiple brokerage fees, tax and other charges reduce your profit amount. But in the long term, there are minimum brokerage fees and also tax deductions available which help to increase your profit.
Less stressful and time-saving
As long term investing is not a full-time job it is less stressful. Long term investing doesn’t require full-time attention and hence it saves a lot of time. It is a more flexible and accessible option as you won’t have to study the charts and the markets every day.
What is intraday trading?
trading or investing is what most people are confused about while starting their stock market journey. In the stock market investing in buying the stocks of the company for a longer period is long term investing. On the other hand, trading is speculation of the price movements of the stocks to book the profit. But stock trading is not just that there are multiple ways in which traders trade day trading, swing trading, options trading and many more.
Intraday trading is nothing but trading in a particular stock for a day and booking profits before the trading hours end. A combination of fundamental analysis and technical analysis is required for successful intraday trading. So let’s discuss fundamental analysis and technical analysis.
Benefits of intraday trading
Massive gains on some good opportunities
Investors often miss out on some good opportunities while focusing on long term investing. There are many examples where stocks have given good short term returns due to short term changes. For example in a pandemic when the entire market was down Pharma stocks still give good short term returns. Long-term investors while focusing on the long run tend to miss on opportunities like this. Sometimes in the short run, some stocks give multi-bagger returns despite weak financials but long term investors can’t enjoy this type of return. Intraday trading is little bit risky but can give great returns if studied properly.
As every coin has two sides, even long term investing has its pros and cons. It depends on an individual choosing between long term and short term investing. If you are someone who doesn’t want to invest money for a long time and want to earn good compounding returns then long term investing is for you. If you are a beginner then you should go for long term investing as it doesn’t require trading skills and complete attention during market hours. Long term investing is based on the principle of,” belief in companies”. If you believe the business is good and has growth potential then only you should invest in that business. That was everything you needed to know about long term investing and its pros and cons. Now it’s your turn to decide which one is right for you.
Happy investing!!
