Amzy Hibler, CFO of Technology Guru and former executive and manager with Chevron Corporation, enjoys investing in the stock market in his spare time. Investors like Amzy Hibler often use a mix of both short-term and long-term stock trading.
In the stock market, any trade in which the investor holds the stock for less than a year is a short-term trade. Short-term traders seek to take advantage of small fluctuations in the market. This form of investing comes with relatively high risk, due to the possibility of a downward short-term fluctuation.
Long-term trading involves holding a stock for more than a year. In long-term trades, the goal is to see the stock's value rise gradually, generally at a pace comparable to the overall market. A general upward trend is more important than individual small-scale fluctuations for long-term traders.
Short-term and long-term trades serve as more than just descriptors of time. These designations carry legal weight and are taxed differently. Long-term stocks, however, enjoy a reduced tax rate under the capital gains tax, short-term stock trading is taxed as regular income. This encourages investors to spend at least some of their money on long-term, economy-stabilizing investments.
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