Swing Trading vs Long Term Investing: Which is Better?

When it comes to trading and investing, making profits is the ultimate goal! To achieve this, there are quite a few investment strategies to follow, but among those, two of the most popular are Swing Trading and Long-Term Investing.

Those looking for short-term quick profits may choose the Swing trading strategy. Meanwhile, those looking to build long-term wealth may choose the long-term investment strategy. 

Either way, both of these vary greatly, which raises a question – which is the better strategy for you – Swing Trading vs Long Term Investing?

Like the strategies, the answer to this puzzling question varies from person to person. Your goals, risk tolerance, and more factors determine the suitable strategy for you.

So, in this blog, let’s learn what exactly each of these strategies defines, their pros and cons, and subtle differences.

What is Swing Trading?

A swing trading strategy is a way to make profits by taking advantage of short to medium swings in the price of a stock. The motive of this strategy is to generate small profits from one trade and then move on to the next.

To find good trades, swing traders prefer using technical analysis, which helps them determine when to buy and sell. They usually keep a short or long position for more than one trading session, ranging from a few days to even a few months.

Unlike intraday trading, where you buy and sell within the same day, swing traders may have to hold onto the stocks overnight or over the weekend. This means they might be affected by price changes when the market is closed.

What is Long-Term Investing?

On the other hand, long-term investing simply means buying stocks and holding onto them for at least a year. The primary goal here is to make profits without putting in much effort to choose stocks constantly. Long-term investors usually aim to find companies with strong growth potential and keep the stocks until they bring in good profits or help achieve financial goals.

Unlike swing traders who might use technical analysis, long-term investors usually rely on fundamental analysis for picking stocks. Why? It’s because a stock’s fundamentals, like its earnings, price-to-earnings ratio, book-to-price ratio, and free cash flow, can greatly affect its performance in the long run.

Famous long-term investors like Warren Buffet follow a value investing strategy, looking for stocks trading at a discount. This involves evaluating the fundamental aspects of a company, as mentioned above.

Another key aspect of long-term investing is patience. While patience is needed in swing trading, too, long-term investing requires a different level of calmness to withstand ups and downs in the market.

Unlike swing trading, which involves shorter-term moves and can be riskier, long-term investing is relatively less risky. This is because it doesn’t involve trying to predict short-term trends or price swings.

Read Also: Swing Trading vs Day Trading: Pros and Cons

Pros & Cons – Swing Trading vs Investing Long Term

Swing TradingLong-Term Investing
ProsIt’s a profitable strategyWhen you sell, you pay less in taxes.
You can do it part-timeIt’s not as risky as short-term investing.
It requires a little time commitment.Transaction fees are low.
It doesn’t hold your capital for too long
ConsThere’s a risk of prices changing a lot over the weekend or overnight.It’s time-consuming.
The cost of trading can add up over time.You need to be patient.
Figuring out the right time to trade can be tricky.You should have enough knowledge before starting with it.
You might miss out on really good stocks.With so many options available, it might be difficult to decide.

Difference and Similarities – Swing Trading vs Long Term Investing 

Both of these strategies have different approaches but some similarities, too. And to truly understand these in detail, let’s discuss the similarities and differences of swing trading vs long term investing.

Time Commitment

One of the best things about Swing trading is that it doesn’t demand much time. It’s like short-term trading, where you keep an eye on your investment, making adjustments every few weeks. Long-term investing takes even less of your time. 

Once you’ve invested, you can practically forget about it. You might check in occasionally, especially during market downturns, but long-term investing is super time-efficient if you plan to build a retirement fund. This is especially great if you have a full-time job and want to secure your future.

Approach

In terms of approach, Swing trading is about making small returns per trade by riding the short to medium swings in a stock’s price. It’s like catching waves in the stock market. 

On the other hand, long-term investing follows a “buy and hold” strategy. This means you invest to hold onto your assets for over a year. It’s a patient game, aiming for relatively high returns over the long haul. 

Returns (Profit & Time)

Now, when comparing Swing Trading vs Investing Long Term, let’s talk about the details of returns – the profits you make and the time it takes to make them.

What most people care about when choosing an investment strategy is how much return they can make. In this case, Swing trading stands out regarding returns – in both profit and time. While each swing trade might bring in a lower profit percentage (like 5-10%) compared to long-term investing (potentially having 25%, 50%, or even 200% return), the frequency of trades is the game-changer.

  • So, swing traders make a lot more trades than long-term investors. Throughout the year, those small wins in each trade add up to way more than what a long-term investor might earn because these small wins compound your earnings faster.
  • And the best part? These returns come in quickly because swing traders get in and out of their positions in just a few days. 

So, if you’re looking for a way to make money relatively fast, swing trading can be an excellent source of secondary – or even primary – income. It’s like building up a bunch of small wins that, when combined, become a significant victory.

Analysis

Swing traders and long-term investors use different tools because their goals are different. Swing traders focus on short-term price movements and use technical indicators to predict these changes. Price movements are the key for them, so they might look at charts and patterns. 

Long-term investors, on the other hand, care about the business behind the stock. They use fundamental analysis to understand a company’s financial health and potential for long-term growth. Here, they might study a company’s earnings, management, and market position.

Risk

Risk is a crucial factor in the debate between swing trading and long-term investing. Neither style is automatically “risky” if you know what you’re doing and have the right tools. Losses happen in any strategy, be it Swing Trading vs Investing Long Term.

But, the thing is swing traders usually take a bit more risk than long-term investors. When they open a position into a stock, they’re capitalizing on a short-term upswing. 

And here, the reality is that it doesn’t always happen that way. If you’re not careful, you might miss your chance to exit and lose profits.

On the flip side, long-term investors play a different game. They make more long-term investments into less risky assets and are likely to work out in the big picture. It’s like they’re placing their bets on the slow and steady stocks, aiming for a sure win over time. 

Which is Better – Swing Trading vs Long Term Investing?

Understanding the pros and cons, differences, and similarities, which of these strategies sounds like the right fit for you? 

Let’s make it easy for you –

Swing trading is like making a volume of trades to gather returns. It involves spending time and effort to find the right trades using technical analysis. 

  • So, it’s a good option if you have knowledge of technical analysis and have time to keep an eye on price swings. 
  • Choose it – if you’re ready to do some technical analysis, keep tabs on swing trading indicators, and aim for consistent profits to boost your income.

On the other hand, long-term investing is about picking strong businesses that can stand the test of time using fundamental analysis. It’s less time-consuming, requiring less research, and occasional adjustments. 

  • This makes it a solid option for working folks who can’t spend hours staring at charts but still want returns that beat inflation. 
  • Choose it – if you’re eyeing retirement, have some extra cash you don’t need right away, and are good with letting your money grow over one, three, or more years.

Whatever you choose, remember it must align with your goals, risk tolerance, and affordability of time, money, and effort. 

Final Thoughts

So, both Swing trading and long term investing are best on their own.

And even better – instead of debating over swing trading vs long term investing – choose both!

You can prepare for your future by investing in long term investing while making profits through swing trading. This allows you to enjoy the best of both strategies while diversifying your investment strategy.

For that, check out Upmarket Academy’s courses – learn Swing trading and long-term investing now and level up your trading!

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