Can a short-term investment be better than a long-term one?
What do we mean by short-, medium- and long-term in this context? Short-term investments are generally those with a time horizon of up to one year. Medium-term investments are those with a horizon of 1-5 years, and long-term investments cover a period of more than 5 years. Let’s focus on the investment period of up to one year. Of course, it is possible to make very good investments within this period if you are willing to take high risks. Therefore, one must expect high price fluctuations of the investment. But if you had invested your money in vaccine manufacturers BioNTech or Moderna a year ago, for example, you would have doubled or tripled your investment by today. And all this in a very short time. So it’s entirely possible. But can we really say that a short-term investment is the best investment?
Where are the dangers in short-term investments?
he only problem with the above-mentioned topic is that, with tens of thousands of stocks, you have to filter out exactly those that will launch such a rocket. And the start must be immediate! So there is not much time for searching and lengthy analysis of companies. In practice, however, it has been shown that it is extremely difficult to find precisely these companies in time. Complicating matters further, for the best short-term investment, the timing has to be right twice. An entry at a low price and an exit at a high, if not the highest, price. So many parameters have to be perfectly coordinated.
The probability of this working is very low. And even if one manages to make an ideal short-term investment in a stock, and after the ideal exit the money from the sale is available again along with the profit, what happens then? Once again look for such a price rocket and invest in the short term. At the latest then it usually goes wrong for good.
It is, therefore, more a case of short-term gambling and hoping for a quick buck than a systematic and consistent investment strategy. Strictly speaking, short-term investment and a targeted investment strategy are mutually exclusive. Accordingly, it would be wrong to claim that the best investment is a short-term one.
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Investing for the long term is the best investment
The long-term performance figures of the major indices such as the Dow Jones, S&P 500, Nasdaq EuroStoxx50 and Dax clearly show: If you want to invest optimally, you have to invest for the long term and stick it out. And this is best done over many years, or better yet, decades. As the duration of the investment increases, the risks are reduced more and more.
Investing consistently over the long term is arguably the best investment – and the only investment strategy worthy of the name! As an established asset management company, we also pursue this long-term approach – and have a proven track record of success.