| The allure of buying and selling stocks frequently can | | | | The second obstacle to battle when trading |
| be difficult to resist, but the temptation may be | | | | frequently is commissions. Obviously, the more trades |
| costing you more than you think if you indulge | | | | you make the more money you are paying in |
| yourself. Over the long term, investing in the stock | | | | commissions. While online discount brokers have |
| market has proven to be a very successful strategy. | | | | reduced the cost per trade, over time, frequent |
| Unfortunately many people lack the discipline of long | | | | trades can still eat up a significant portion of your |
| term investing and continually look for the quick short | | | | portfolio. Once again, if you are taking a long term |
| term gain. It is very difficult to achieve short term | | | | investment approach you are reducing the overall |
| results with an instrument designed to accumulate | | | | commission expense to a negligible amount. |
| wealth over time. It is not impossible to achieve short | | | | The third potential setback to short term trading is a |
| term results by day trading, but more people fail at it | | | | big losing trade. Unless you are very disciplined and |
| than succeed. Furthermore, even if you do "beat the | | | | diligent about your stop losses, you will eventually |
| market" you still have to overcome three more | | | | have a significant loss when trading. When that |
| obstacles to achieve lasting success. | | | | happens you can do one of two things: Sell the |
| The first obstacle for short term traders is taxes. | | | | stock, losing valuable working capital or wait, hoping |
| Every time you sell a stock you are subject to taxes | | | | the stock will go back up. Day traders are not |
| on the gain of that sale. When investing for the long | | | | concerned about the fundamentals of a company so |
| term, portfolio turnover is much less. Therefore, you | | | | a losing stock position is less likely to go back up |
| are exposed to fewer tax liabilities while you continue | | | | without strong fundamentals to support it. Either |
| to grow your portfolio. The ultimate long term | | | | choice, selling at a loss or waiting for a price rebound, |
| investor, Warren Buffet, believes in buying good | | | | can be very costly for a short term trader, both |
| companies and holding them forever, or at least until | | | | financially and emotionally. However, if your investing |
| something fundamentally changes the strength of the | | | | for the long haul you are looking for solid companies |
| company. When considering to sell a stock you own, | | | | that will increase in value over time. Short term price |
| you need to factor in the effect taxes will have. | | | | drops can be a chance to add to your position rather |
| Long term investment strategies delay tax liabilities | | | | than a setback. If used correctly, the stock market |
| allowing your money to continue to grow and | | | | and time are wonderfully allies when trying to |
| compound for you. | | | | accumulate wealth. |