When people talk about long-term investing, they primarily mean the stock market and the purchase of shares in companies. Although the picture below shows that the most successful investment (where retention period = last 10 years) is Bitcoin (how to make money on cryptocurrencies).
The main cryptocurrency exceeded all top stocks by several orders of magnitude.
“Buy and hold” — this principle is most suitable for the logic of a long-term investor. There is even a curious anecdote on this topic:
The daughter comes to her dad, a rich investor, and asks for money:
-Dad, give me $ 100, I want to go to the store with my girlfriends, then to the disco.
-No, I’m sorry, honey. I now have all the money in stocks.
-When will you sell them?
PROS TO LONG-TERM INVESTMENT
Less stress: there is no need to constantly monitor the stock market.
Time savings: You can devote the time saved from constantly following the market to other productive activities — both related to the exchange and far from it.
Less hassle: You don’t need to learn different trading strategies or platforms as you won’t be an active intraday trader.
If you do not take the specifics of a particular country, but look in general, then long-term trade helps to save on taxes. It is possible that while short-term traders may pay around 20% -30% in capital gains tax, long-term capital gains will be taxed at only 5% -15%.
Receiving dividends. Your capital grows not only due to an increase in the value of shares, but also due to dividends that the company pays on shares.
CONS OF LONG TERM TRADING
Investment: Long-term trading, as the name suggests, requires you to have free capital. And he should be free for many years to come. You must be prepared that a certain part of your capital will be locked in one share, and you cannot use it to benefit from short-term speculation.
Deep knowledge. Long-term trading requires an advanced understanding of the assets you are investing in. You can’t just make decisions based on certain news, advice, or rumors. It is also not enough to rely solely on charts or indicator signals to buy or sell. You need to be an expert in fundamental analysis — both of an individual company and of the global economy.
Long term trading requires a lot of patience. Failure to remain calm will create problems for the investor in the long run.
Age limits. You must have a life horizon in order to reap the benefits of your investment. If you are 60 years old, then it is too late to start an investor career for obvious reasons.