Short, medium or long term?
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Definition of temporality
The temporality of a financial investment corresponds to the investment horizon. It can be short, medium or long term. Temporality is a function of your performance objectives and your investor profile. Each temporality has advantages and disadvantages.
Short term
A short-term investment is between one hour and one week. We are not talking about investment but trading. Below one hour, we talk about very short term trading which includes scalping and also some day trading positions. If you use technical analysis you will view charts ranging from 15 minutes to 4 hours.
Short-term advantage
- Ability to get performance quickly
Short term disadvantages
- Time consuming: short term trading requires regular trade monitoring (stop loss modification, trend reversal, etc.)
- Significant transaction costs: A short-term trader places a large number of orders and pays the spread and/or commissions for each round trip. This has a negative impact on performance.
- More stress: Watching the price charts creates stress.
Medium term
A medium term placement is between one week and several months. We can then call it an investment. You can then integrate the notion of fundamental analysis as a complement to technical analysis. If you use technical analysis, you will view daily charts.
Medium-term advantages
- Suitable for a wider range of individuals
- Performance determined by the trend of assets in the portfolio
- Reduced stress
Medium term disadvantages
- Requires more analysis than short term for asset selection.
- Impact of macroeconomics/microeconomics
Long term
A long-term investment is between one year and several years. In this case, the rules of portfolio management apply. If you use technical analysis, you will view weekly or monthly charts.
Long-term advantages
- No stress
- Requires very little time: No need to regularly monitor changes in positions
- Very low transaction costs: There is no frequent round trip and you only pay the spread and/or commissions once.
- High earning potential: the longer the investment horizon, the greater the earning potential.
- Ability to invest large amounts with reduced risk (with good diversification)
- Suitable for all investor profiles
- Possibility of having your portfolio managed (UCITS)
Long term disadvantages
- Necessity of not needing your savings for the duration of the investment
- Requires in-depth analysis: technical analysis is insufficient, fundamental analysis is also required
- Can have a significant negative impact on your assets in the event of poor investment timing.
