My previous concerns have largely been resolved after carefully reading the posts on Poten's Avatar Law Cafe.
This process over the past day or two has been a very exhilarating experience for me personally,
and I'm writing it down to reinforce the content in my mind.
Long-Term Investment vs. Short-Term Investment
First, I believe that investing is an act of expecting to make a profit.
Then, when comparing long-term and short-term investments solely based on profit,
and if we judge based on historical data up until just before the present,
anyone can see that long-term investments yield higher returns.
(Of course, this assumes that you have selected a good stock that is trending upwards and held it for the long term.)
However, various studies show that humans have a hard time enduring losses,
and historical data also reveals that there are periods of significant declines during long investment periods.
So, based on the assumption that I had engaged in long-term investment,
I've explored the conditions for successful long-term investing, and they are as follows:
Pure money that won't be touched during the long-term investment period
Unwavering belief in the face of volatility, especially significant declines
I believe that if these conditions are met, long-term investment is feasible,
and I believe that achieving stable cash flow is ultimately the key to meeting these conditions. (Let's call it 'stable cash flow').
In other words, having a stable income to cover current expenses or generating 'stable cash flow' is necessary
to be able to have money that can be invested for the long term and essentially forgotten about.
(Of course, the primary goal of long-term investment is significantly higher returns, so it's never about truly forgetting about it!!)
So, if we can generate 'stable cash flow' and accumulate investment capital, we can engage in long-term investment,
and we can hope to achieve substantial profits through skillful long-term investment.
But why do I think I need to start with short-term trading?!
Because I believe that short-term trading is a way to generate 'stable cash flow'.
Do you also think that short-term trading is one of the various ways to generate 'stable cash flow'?!
Examples of 'stable cash flow' might include salary, rent, dividends, etc.
In contrast, short-term trading seems to be in the realm of professional traders,
and it's often perceived as something that can lead to significant losses in a short period if a stop-loss order is triggered.
That's how I perceived it when I didn't know much about stocks, but as I learned a bit more, I redefined my understanding of short-term trading.
I believe that if you carefully consider short-term trading as an investment methodology, establish principles,
and build a system to automate it, you can definitely create 'stable cash flow'.
Of course, as a still-learning investor (주린이), I've only been implementing this for about 3 months, so I can't be completely certain,
but so far, it's been more successful than any other investment method I've tried in generating 'stable cash flow'.
Therefore, in conclusion, to pursue long-term investment, you need to generate 'stable cash flow',
and I believe that short-term trading is one of the various ways to achieve that.
Once short-term trading stabilizes, my next goal is to invest the profits generated from it into long-term investments using a systematic investment plan,
which is why I believe I should start with short-term trading.
Long-term investment follows trends to generate profits, while short-term investment leverages volatility for profits. - From Poten's Avatar Law Cafe posts
Comments0