Long Term or Short Term Investor

Short and long term investing are both valuable tools for you however, both must be used correctly to achieve maximum benefit.

When setting up your goals (as we discussed in the prior articles), you will want to have attainable goals in all phases of your trade plan.

While we will focus a great deal on shorter term trading (via options), it is practical and sensible to have a plan for your longer term investments as well.

Investments Suitable for Short Term Investments

There are a number of investment vehicles that will suit you well if you have specific short term investment goals. Some stocks that have higher volatility will offer you great ‘short term' investment opportunities, as will both put and call options. Whether you choose to invest in equity options or index options, you will need to understand not only the rewards that can be a part of option trading but equally important that you understand the risks of trading in options (especially shorter term options).

With a short term stock investment, you can purchase a security and one you own it you're free to sell that stock at any time after the purchase with no deadline as to when you can sell.

When purchasing options (whether they are puts or calls) you have a limited window of opportunity that begins the day you purchase that option and continues only through the option exercise date. It is critical that you invest wisely when dealing with options (and all other securities) so that you can minimize your risk and maximize the rewards.

Investments Suitable for Long Term Investments

As with short term investments, there are several options available for long term investments depending on what your investment goals are.

If you are seeking liquidity in your investments as well as safety, you will most likely be better suited to bonds, or a bond fund (mutual fund companies offer these) or even a money market fund (with low return but guaranteed return on investment).

If you are not as concerned with liquidity but are concerned with not losing your investment, you may want to consider investments into secure stocks that you know remain in the top of their markets. While these securities may have some volatility over time they have proven to be solid market performers over time and will most likely some stability in your portfolio.

Mutual fund companies offer a wide variety of investment options that will allow you to invest in portfolios of funds that will offer longer term investments based on your particular investment objectives as well.

If you're not as concerned with safety of an investment, there are many long term trading opportunities in options including LEAPS and other longer term options.

Our next article: How much money are you planning to invest?