Is It Best to Invest for the Long-Term, Intermediate Term, or for a Short Term?

There can be little doubt that investors have been pondering this question since the general public began active participation in stock investing. To add to the dilemma, Wall Street and Wall Street affiliated firms spend massive amounts of money pushing the newest and hottest investment-of-the-week. I think that it is important to realize that Wall Street’s goals and investors goals are not necessarily congruent.Of course, there has never been a shortage of scandals that have bedeviled Wall Street, and investors have generally ended up on the short end of the deal. Whether it was the recent financial meltdown that was a direct result of improper mortgage risk assessment by Wall Street bankers whose primary goal was to repackage the mortgages and sell them at a profit, as the recent credit evolved, or the never ending push to bring new, innovative, and profitable investments to the investing public, regardless of the welfare of the public. You must understand that Wall Street is dedicated to making money for its shareholders, and is definitely not worthy of investors blind trust.Against that backdrop, we must attempt to answer the question posed in the title of this article. What is the best investment strategy for every individual has to be considered on a case-by-case base. As a general rule of thumb, traditional thinking dictates that the farther you, as an investor, are from the time you will require the use of the money, the longer your investment horizon should range.But recent years have brought some change to that mode of thinking.Let me first issue a disclaimer, of sorts: I have been a long time institutional investor for most of my professional career. I was a swing trader in those days, and my trades ranged from one trading session to several weeks. In the last eight years I have narrowed the scope of my investing to primarily intraday trading, using scalping methodology. My average investment horizon is now about 15 minutes. Wow! That is a real change in investment thinking; but I am in all cash every night and I sleep like a baby.Where it 20 years ago, I would strongly recommend that younger investors take a long term approach to their investment strategy. I don’t feel that way anymore, for several reasons:- The ultra-fast dissemination of news through social media and traditional media has literally brought the world into our living rooms. By the same token, the markets receive data and react to that data nearly instantaneously. There can be no doubt that the rapid transmission of information across the globe has added a volatility component into the market that did not exist in prior decades.- Computer based trading programs, also called black box trading, and has had a profound effect on the price action of all highly liquid investments. High Frequency Trading (HFT) operators claim that, under current technology, they can execute 3,000 trades per minute. Further, the NYSE currently estimates that in the area of 50% of all trading fall under the category of HFT. This change of trend in trading has definitely affected the personality and performance of investment practices of the last 6-8 years.- Mutual funds, which are strictly longer term investment vehicles (excluding the ETF variety of mutual fund); have consistently underperformed their corresponding index returns with unprecedented uniformity. Last year, nearly 85% of all open end mutual funds failed to match their index benchmarks.Is long term investing dead?No, not necessarily. But the days of buying the current hot stock and then forgetting about it are long gone. Price volatility has driven the market to lavish highs and unprecedented lows, which has caused long term investing to be viewed as a far less attractive investment choice than in prior times.That is also my viewpoint.I manage my portfolio with a 2-year investment horizon. Given the current state of affairs in the world (two wars, the housing crisis, Japans nuclear issues, the euro crisis, the US economy), I am confident looking ahead only a couple of years, and the once vaunted USA economy cannot be counted on, at the present time, to churn out double digit returns. I feel this approach is well considered and realistic, given the current geo-political problems we are currently experiencing.So I have discouraged longer term investing, suggesting smaller investors concentrate on the intermediate term. I have taken the time to mention that I am interested in intraday (or, day trading) and most of my current investment (or trading) income comes from intraday trading. I prefer short term trading and about half of my portfolio in straight stock investing. I have outlined the reasons for this above. While short term investing takes a bit more time and effort than intermediate or long term investing, the rewards may be well worth the effort.In summary, we have taken some time to look at the pros and cons of long-term investing, intermediate investing, and short term investing. I have stated that in my current economic outlook, I am shunning long term investing in favor of investing with a shorter-term outlook.

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