Act Short Term To Build Long Term – Stock Invest (4). Most experts advise holding your stocks for the long term. Few point out that many small short-term gains will add up to a big long-term return. As a matter of fact, if you don’t act in the short term with a vision toward the future, there may not be a long term to bear fruit. Long Term What do we mean by long term? Is it 30 years, 5 years, or one year? Well, it all depends on which investment you’re talking about. Many people think that if an investment does not work out now, you just wait until it gets better someday. This is a risky way to invest unless you can afford to lose plenty initially. Besides, you’re just leaving it up to chance if you don’t do anything for now. Are you aware that short-term profits will always add up to become long-term benefits? In life, most kinds of investment require short-term efforts to yield long-term results. They are: health, education, hard work, infrastructure, goodwill, etc. They all have one thing in common: small, incremental, and persistent short-term efforts that will pay handsomely in a few years. When you have a job or own a business, don’t you have to work everyday and every hour to build a better future? When you invest in education, don’t you think that you become smarter everyday before you receive a diploma? When you invest in stocks, their values are tied to the changing fortunes of the companies. As you know, companies rise and fall and your shares go with them. Remember the dramatic rise and fall of Enron? There’s nothing left if you fail to cash out in the short term. Furthermore, recessions come and go every few years when share prices depreciate greatly even for good companies. It’s very difficult to assess the long-term risks of a company when you look out beyond one years. Investing in a fund with diversified holdings sounds like a good idea. The problem is that most funds have all kinds of restrictions to penalize you for cashing out early. When a downturn comes along every few years, you will lose part of your investment because its value is tied to the falling stock indexes as designed by the funds. In other words, you will lose all your short-term gains plus your initial investment when you invest in a fund for the long term. It takes only one downturn to wipe out all the previous gains before you cash out (Please see Series 3 for investing in funds). Here’s my advice for the long term. If you know little about the stock market, invest your cash elsewhere such as life insurance or bank savings with guaranteed returns. Real estate is good especially when you’re a renter paying the landlord every month. In real estate, you have population growth and business development always working for you, in addition to getting a shelter. When you think long term, the safety of your cash should assume top priority. The stock market is not safe at all unless you know how to play. Else, you have to rely on plenty of luck on your side. Short Term Have you ever thought that if you profit often in the short term, the result is big profit in the long term when you add up all your gains? This is the same principle as going to work everyday. Your daily pay is not much but it adds up. As always, your vision should never be fixated on the short run, but your efforts should be persistently directed to improvement on a daily, weekly or monthly basis. In other words, you should try to make your talents and money work everyday because they all add up for the long term. Life presents all kinds of risks. The question is how to avoid and manage them. There are always gains and losses in life. The important thing is that we make sure the gains outweigh the losses. The goal of short-term investing in the stock market is to get in and out whenever an opportunity arises, make a reasonable profit each time, and maintain a fluid cash position so that you can continue to play again. Short-term investing is a trial-and-error process, like most things in life. You will acquire more insights about the stock market as you go along. In addition, you need to cultivate some discipline when you play, which includes more don’ts than dos. They are: Don’t leave your investment unprotected. Don’t be a gambler. Don’t be greedy. Don’t panic. Don’t overestimate your own judgment. Don’t lose sight of the fundamentals despite good or bad news. Finally, Remember that your luck is 50% at best. In later videos, I will explain more about how to invest for the short-term in order to build for the long term. For further information, please email to stockfessor@comcast.net.