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Gains Of Long Term Investment

What is a long term to one may be a short or medium term to another.  In general, a long term investment is an investment with a term higher than five years up to ten years.  A medium term includes investments that last for at least a year up to four (American presidential term) or five years.

Most long term investors use markets' cycles, trends, money flows in conjunction with lasting monetary and the economic policies. 

Long term investment does not just rely on its time alone, but more on the real factors that can cause a financial asset to start a trend or cycle. 
There are many gains for opting for a long term investment strategy.  Let's find out about them

Obvious Gain Of Long Term Investment

One has enough time to ride the ups and downs in the financial markets without the need to worry about the short and medium term price fluctuations.  Those positions are not really under pressure, and will likely remain in place up the time one decides to fully or partially close them.

2nd Advantage Of Long Term Investment

One can take multiple profits as the price starts a trend or cycle until one takes the last profit by the end of the term.

For example, an investor that buys gold in 2003, can grab profit at different times without shutting down the entire gold investment portfolio. 

3rd Gain Of Long Term Investment

One can add more new positions at different stages throughoutt the trend or cycle if one masters the market timing or mini trends (or cycles).

4th Gain Of Long Term Investment

One of the gains of the long term investment is that it allows one to maximise gains with both the capital gains and dividends.  The capital gains come from the price-action (rising in a bullish trend but falling in bearish season).  

When one buys 100 stocks of a company A at €20 and it rises to €28, the capital gain is equal to the difference between (100 x $20) and (28 x 100).  The capital gain in this instance is $800.  Now, if the company is also paying either quarterly or yearly dividends, one will amass a bigger profit than a long term investor who purchases a similar stock that does not pay dividends for the same capital gain.

5th Gain Of Long Term Investment

A smart long term investor always invests in companies that pay juicy dividends.  Indeed, those dividends often compensate for the initial capital depreciation when the asset price is stagnant or going south.

In that instance, though a bullish position is in red, revenues from quarterly or yearly dividends will help to reduce losses.
Never buy and hold a company that does not pay a dividend as a long term investor.

Peace Of Mind For A Long Term Investor

The difference between a day or swing trader and long term investor is the peace of mind that the later is exhibiting.

Surely, a long term investor who has a viable investment strategy will not lose his or her sleep over 500 pips decline in one day or week.  He has the peace of mind that after the storm, things will settle down.

Quite often, a short or medium term market player is forced to close positions due to sudden and unpredictable markets forces.   Those shocks can be contained over a longer period of time if one has a more strategic long term game plan.

Reducing Losses As A Long Term Investor

A long term investor who lets winning positions run, but cut losses before they grow will surely reduce losses, and have a profitable investing account.

Imagine one opens ten bullish positions as a long term investor.  Moreover, one is also a defensive investor that hates to lose. 

If one closes six positions in a timely fashion because one realises that they are more likely to cause greater losses, but one also maximises the gains of the other four positions, one can still be profitable.

The idea is to cut genuine losses, and double up on winning investments.  Of course, one requires more experiences and skills to turn a risky investment portfolio into profit.

Conclusion


There are gains to invest as a short and medium term investor, but in the long run, long term investment's advantages outweigh the earlier. 

An intelligent investor with robust investing tools is more likely to survive the financial markets' ups and downs without being forced out of positions in a short to medium term. 

Though, the long term investment requires more patience and understanding, it also increases one's survival rate. 

Short and medium term investors can quickly deplete their investment capital while a long term market participant is still holding his grounds.  A short or medium term investor can also decide to have a long term investment portfolio.  At the end of the day, the decision is yours.
Well, this is the end of this article about the advantages or gains of a long term investment.  I hope, you enjoy it very much.  If that is the case, please do not hesitate to share or bookmark it.  Please remember to say few good words about us in various trading forums.  I will really appreciate that.

Please stay tuned because it will not be too long before I come back with another eye popping investment article.

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This article is written by G. Beaulieu
Founder Of Stochastic-MACD.Com