How to Determine if You Should Invest in Long-Term or Short-Term Stocks?

There are various strategies you can employ when choosing whether to invest in long-term or short-term stocks. What follows below may help you:

Short-Term Stocks

A good example of a short-term stock in copper:

A year or two before the boom in copper prices, a large number of reports and analyses highlighted a supply deficit stemming from the falling output and rising demand. Also, expectations of pent-up demand from the coronavirus pandemic could have been the catalyst to buy copper stocks, like Freeport McMoRan or Rio Tinto.

If you enjoy monitoring trends and scanning the headlines on a daily basis, then short-term investments and trading are for you.

Long-Term Stocks

In the long term, there are many metrics to hone in on. Here are a few factors to consider before you decide:

• Dividends: Has the company paid and hiked its dividend regularly? If so, this is a great long-term play.
• P/E Ratio: What is the price-earnings (P/E) ratio? This metric determines if a stock is overvalued or undervalued. If a P/E ratio is high, it might suggest that the stock is in store for a pullback because it is overpriced. A lower P/E ratio indicates a potential value for long-term investors wanting to get in on the ground floor.
• Analyst Ratings: Contrary to public opinion of late, analyst ratings are still superb resources since they have access, resources, and time to comb through intricate financials.

If you are a pro at investing, you can also study charts and determine the trend lines.

Final Thoughts

Ultimately, when it comes to both short and long-term investing, you need to outline your goals and price targets. Oftentimes, the best long-term pick is something that has been around for what seems like forever, such as Procter and Gamble, Colgate-Palmolive, Walmart, or GE.