Buy low, sell high? Or buy and hold? Learn more about the different investment strategies.
Short-term or long-term, investing is completely up to you and your financial goals.
If you invest with a short-term view, you generally want to take advantage of small movements in share prices and sell the shares quickly for a mini-win.
People normally achieve this through trading, where they buy stocks at what they think is a "low" price, and sell them when the price jumps. Buy low = sell high. You woulda heard that before!
You can win big, but you can also lose big. Remember GameStop? Some winners sold their stock after huge 1,740% returns. Others held on and lost 55% of their investment.
Bottom line? Timing the market can be risky business.
Long-term investing is generally when you hold your investment for more than a year to a few years. Aka, the buy and hold method.
The returns tend to be lower, but you don't suffer big drops either.
And the long-term strategy has proven to be effective. In fact, from 1900 to 2019, the Australian share market returned an average of 6.7%. That means if your great-great-grandmother sold a few sheep and put $100 into an Australian share market index way back in 1900, it would be worth just over $224,000 now. Not bad.
But of course, for this strategy to work, you need to be able to ride out ups and downs in the market - which ain’t always easy.
Investing in shares can certainly help you grow your wealth. But like any investment, there are risks involved - so you need to be clear about your financial goals.
If you're not too sure what your financial goals are - or what your risk appetite is like - you can take an online quiz to help guide you.
You also need to make sure that your emergency savings fund is looking healthy before considering investing in the share market.
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