I am extremely glad to have found this site. Thanks in advance for all the help. This is a timed, 30 minute trial essay for an upcoming clep exam. Please be honest, and share your opinions. Thanks.
Topic: State which type of investing between day trading and long term is better and why. Give reasons for why you think one is better than the other.
Long term investing has much more advantages than day trading in many ways. I will attempt to propagate why I think this is a much more suitable way of investing for the average investor.
Primary reason in my opinion for long term investing as a way of investments are the tax benefits given. With the opportunity of holding investments for a little over a year and receiving the benefits of a lower tax rate, it's very easy to see why professional money manager and longer term investors do so much better than day traders do.
Take for instance someone like Warren Buffet, who has shown over a long period of time, a prolonged discipline in holding on to good companies, sometimes for decades, this discipline have proven to been very beneficial to Warren Buffet and his shareholders.
Long term investing gives you a sense of ease, if you invest in great companies, you don't have the added stress of wondering what's going on with you investment capital as much. Stress is alleviated by doing detailed research about the companies, value, stability and over solvency before capital is risked. Once capital is at risk one can be assured that the investment can be held for long term, thus assuming long capital gains.
Capital is better allocated if it is not depleted by much turn portfolio/trading activity turnarounds. Paying too much commission is the fastest way for depleting capital; to many young, and old investors, are lured to the making and taking profits that are generated quickly, over looking the longer term picture in the process. This leads to much higher tax burdens and an overall depletion of investment capital in the short run.
The desire to make money quickly is very tempting and has an adrenal flow about it, but erringly deceiving as well. Being told stories of investors (more like speculators) investing $1000, $5,000 or $10,000 and parleying it to a $100,000 or $1000,000 in a short spaces of time, is very much the norm on TV and Internet advertising. The trouble with these advertising ideas, are we are not told of the countless destructive evaporation to wealth by these "get rich quick schemes" create. Whereas, learning how to diligently invest and being patient, has proven to have great rewards.