How is Long-term Investing beneficial?

While short-term investments are a lot more exciting, long-term investing actually brings about more stability and at the same time, holds a distinct advantage over its counterpart.

First, when you invest long term, you are actually leveraging on one of the magic ingredients of compounding. And that ingredient is, time. The longer you hold, the more you’re allowing your money to compound and grow. This is something that short-term investing is unable to do. As Warren Buffet once famously quoted, “Our favorite holding period is forever.” This clearly states that the profits long-term investments can bring, easily outweigh any investments trading in the short term.

Second, investing in the long run is actually less risky than short-term investments. That is to say, the longer you hold your investment, the more you reduce the probability of negative returns. In short, to reduce your risk through investment, you should always consider holding it for the long term.

Another advantage that long-term investors have over short-term investors is that long-term investors don’t need to sit in front of the computer all day, looking at how the stock prices fluctuate. Remember, we can’t predict the market, but we certainly can buy into the right business. In fact, once you pick up 3 to 5 right businesses to invest into, all you need to do is to monitor the business performance at least once every year. Long-term investing is certainly a lot less stressful and more rewarding than short-term investing.

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