Investing: should you invest for the short term or the long term?

If only it were possible to say unequivocally which option works best. In reality, however, it depends on numerous factors and the risks and costs you are willing to bear. Sometimes short-term investing is better, sometimes long-term is the wiser choice.

Correctly predicting sharp price movements within a short period of time can definitely yield good returns. That sounds good in theory, but in practice making such predictions is not so easy as it seems. Investors who suffer losses in this way often stop investing altogether. And that's a pity, because those investors would have had a better chance of higher returns if they opted for the slow but steady approach.

Overall, investing for a longer period carries less risk of bad timing or incorrect predictions. That’s because your money has longer to absorb all the fluctuations in the market. Moreover, investing for longer helps keep any investment stress under control, because there’s no need to continuously check to see how your investments are performing at every moment.

Short-term investing is active investing. You are looking to achieve the highest possible return in the shortest possible time, from just a few hours to several years. An approach in which you trade your investments within as little as a few hours is actually called 'speculating'.

Chasing high returns does come with risks and, of course, costs. If you are willing to put a lot of thought and time into monitoring your investments and you have the necessary knowledge, you can opt for shorter investment terms.

Getting started with short-term investing:
Using our online investment platform Bolero, you can invest in the stock market yourself online.

When you invest for the long term, you allow a longer period for the market take its course. You should preferably invest for several years: the longer the better, in fact. There is then less need to worry about market fluctuations, because over time the market always manages to come good.

With a long-term investment, you can diversify your investments more widely, making you less dependent on the results of a single company or sector. As a result, the risks reduce (though of course they do not disappear completely). Moreover, one of the biggest advantages is that you are able to benefit from the 'capitalisation effect', increasing the potential return on your investment even further. The longer you remain invested, the more the capitalisation effect can enable your wealth to grow.

Is long-term investing for you?
An investment plan allows you to stagger your investments over time, regularly investing an amount of your choice.

Would you like to explore all the options to start investing, or would you rather discuss your ideal approach with a KBC employee first? Contact KBC Live or arrange a meeting to receive personal advice.