Making a profit remains the primary aim of an investor. Day trading versus long term investment is a choice savvy investors have to make in their bids to increase balance sheet assets. A few of the differences that exist between both kinds of investments include:
1. Decision Making: Day trading takes place within a business day and may be completed in a matter of minutes. This means that an investor who chooses to make profit this way needs to be on top of things.
Long term trading does not require looking up share prices every other minute. As a result, there is no pressure in making quick decisions.
2. Profit Margin: When it comes to day trading, what matters to investors is how to take advantage of a marginal difference in commodity prices. For this reason, the margin of profit is not necessarily high.
More profit is made in long term investing, however. It involves making enough gain and explains the patience of investors who choose this line of action. Here is a look at the profits of day trading versus long term investing.
3. Compounding: The fact that day time trading involves the completion of business transactions same day makes it an ideal choice for investors willing to re-invest the profits made in real time.
Such a possibility is not available in long term investing. In this case an investor may have yo wait for years to make the desired profit. This does not allow for rapid reinvestment of profits made.
4. Capital Requirements: While there are no hard and fast rules as to how much an investor should venture into the market with, a minimum of $1,000 allows for a reasonable gain to be made. Remember that the margin of profit is low for day trading.
Like day trading, there is no minimum capital requirement for long term investing. However, investors can start with a lesser amount of capital since the margin of profit expected to be made are typically higher.
5. Patience: Waiting for the price of a commodity invested on to appreciate requires some level of patience on the part of a day trader. However, it all ends within a given day.
Long term investing requires more patience on the part of investors. Cases abound where investors had to wait for years just to get the kind of appreciation in share price that they need.
No investment strategy is better than the other, really. Whichever option an investor decides on depends on factors such as how long funds can be left in the investment market among other things.