Long Term Investing vs Short Term Trading

The market had given many investors a bad belated Chinese New Year present and I’m one of those investors affected. In fact, bad is an understatement. Well… just these past 2 days, my overall portfolio had dropped over 6%, which is enough for most investors to declare the end of their investing journey. From a profit of over 5% to a current loss in just 2 days is not something that the faint-hearted can bear. While I’m currently a mid-term to long-term investor, it’s not a pleasant sight considering that it’s just 2 months into my investing journey.

This made me think of Short Term trading, which I did pay top dollar to attend seminars and pick up bits of knowledge. It seems that in this current world where everything has been brought more closely together with technology and markets around the world being interconnected, facing global corrections in market is likely to happen at any time. For example, in these past few days, it seems that China led the corrections, which might be the cause of even markets like Brazil and Turkey to be affected. Who knows? Maybe a terrorist will decide to bomb some place tomorrow morning, adding fuel to fire and my portfolio will see another 50% fall.

It seems like Buying and Holding might just throw us into a state of frenzy as we wonder what other events can happen within the next 5 years. Maybe it’s just me… maybe I should stop checking my accounts and think long-term. However, when do we know the difference between thinking long-term and foolishly holding onto the wrong investments? While I do know quite a lot about investments, I can’t really predict government policies (at best an informed guess), natural disasters or even man-made disasters. My holdings will weather many more events in a long-term investing approach, which is starting to make me uncomfortable, especially since I’m investing in Mutual Funds and I can’t make decisions on which specific stocks to buy.

So, what do I intend to do for now?
Nothing… in the short term. I will still let my current holdings play around, maybe drop some more and focus my attention on my current job. After my examinations and launching of the project I’m taking on in my company, then I will start to take charge of my own finances. It’s likely that I will spend considerable time backtesting the U.S market and coming up with spreadsheets to monitor the market. I think and feel that there’s a need for me to be more proactive than putting my money with fund managers if I intend to become a millionaire and stay as one.

For now, I can only hope that the bargain hunters pull the market back up and drive it back into another bull run.