Long-term investing and intraday trading are two completely different approaches. Long-term investing involves purchasing and holding an asset for more than a year, whereas intraday trading involves purchasing and selling an asset within the same day. Although both of them are tried and tested techniques to generate returns from the stock market, long-term investing has certain advantages over intraday trading. Here’s a quick look at the top 5 advantages.
Compounding Effect
When investing over the long term, especially through a mode like SIP, compounding comes into play. Compounding is a phenomenon where the returns from an investment are reinvested. This reinvested amount also generates returns. However, you don’t get the benefit of compounding with intraday trading since you don’t hold the positions open for more than a day.
Lower Impact of Volatility
In the short term, the stock market tends to be very volatile. This can significantly impact intraday trading. With long-term investing, however, investors can ride out the periods of heightened volatility by simply staying invested. Moreover, volatility always tends to even out in the long term.
Lower Costs
Since intraday trading involves placing numerous trades, the transaction costs such as brokerage, STT and other charges can quickly add up and eat into your profits. However, that’s not the case with long-term investing.
Less Demanding
Intraday trading requires you to constantly and closely monitor the markets. In addition to being time-consuming, this trading technique can also be emotionally stressful since it involves making quick trading decisions. Long-term investing, on the other hand, is more relaxed and doesn’t require active monitoring of the markets.