Can anyone tell me the difference between a short term investment and a long term investment?
> How do they work?
> How do I buy them?
> How do they benefit companies?
> which one benefits the company more and which one benefits the investor more?
> Can I sell both? If yes the who buys them or who can I sell them to? If not then what happens when I want to get rid of them or consider canceling my investment if it doesn't work out well?
Explain these to a guy who knows jack shit about economy (I mean use simple words and not academic economical terms please).
I really want to know which one is really better for the company and which one is better for the economy as a whole because some people say that the short term investments are not benefiting the economy or something like that.
A short term investment is a security you hold on to for less than a year
A long term "..." more than a year
If you hold on to a security for more than a year, then you don't have to pay taxes on the gain whereas if you don't you have to pay a capital gains tax rate
>What happens if no one wants to buy them?
If noone wants to buy them, the demand decreases, when the demand decreases, the price of the particular commodity in this case your shares gets cheaper and cheaper.
if everyone wants to buy it however, the demand rises, as the demand rises the price gets higher.
Now go back to /v/
They are both essentially the same thing, the stock exchange itself doesn't care how long you hang on to a stock, only the taxman does.
If the price plummets far enough then the company will be delisted from the exchange. Congrats you now own penny stocks. These can go up or down but mostly go down. Eventually a stock will be worth less than brokerage fees. At that point you may as well hang onto it - you'll be paying money to get rid of it.
Your best bet is to sell before a company is delisted. The specific requirements change from exchange to exchange.
I should probably note that stocks with higher prices are worth more - in theory they fluctuate in price less
Small caps are more volatile and large caps are a bit more stable but still volatile. Bonds are more secure long term but offer less return
So with a diversified portfolio entirely in small cap stocks (Nasdaq) you could see anywhere from negative to 17% return next year, large cap (djia) negative to 15% and bonds are lowers
Okay why does the government want to encourages long term investments rather than short term investments by adding extra tax on the short term? I mean what's the point? Why not make it the same tax on both?
Okay correct me if I'm wrong, but don't stocks mean a share of the profit?
If I buy 10% of the company's stocks then I own 10% of said company right?
And if so then what happens when I buy stocks from a company? Am I supporting the company?
Let's assume I paid $10 for a stock in EA then am I going to pay EAA $10 for the stock? Or am I paying someone else? And what happens when the price goes up and I eventually sell it to someone else for $10.5? How is this transaction going to benefit the company?
and to answer the original question about long vs. short term
>>1062095 did a good job of explaining holding periods, short term gains are taxed as income and long term is taxed capital gains
I don't really care too much about holding periods for me it depends on what my goal is, but i like to break it into 3 categories:
if i'm looking at a "short term" investment it means that i'm happy with the amount of cash i have and am saving up for something in the next 6-9 months (car, house, wedding, education, etc.). if this is the case i'll be looking to just make sure it doesn't go down the shitter so it will be a combo of savings account, government securities, etc.
a "long term" investment would be something like the property itself i bought or my stocks for retirement (obviously as you reach retirement age start moving some of it to short term so you aren't impacted by huge swings and have a set amount for the next X months). the key here is to keep contributing but not to watch it all the time, check in every few months to see how the performance. you're in this one for the long haul so even down years aren't a huge issue
finally speculation -- i take a few grand i can afford each year and bet on long shots the holding period here can be long or short. this is just to have fun and hope that i can be the next /biz/ millionaire
The company cares about the stocks because the stocks are the companies ownership. Grotesques incompetence by management is a sue-able offence. There are a few minor benefits as well like being able to sell more directly but mainly they care about the owners opinion because shareholders can and do have annual meetings which may make changes to the structure of management.
Some stocks pay dividends (as in when they make a profit they pay stockholders) whereas others are aimed at capital growth (The profits go to the exchange who move the price of the stocks higher)
Control+Alt+Down to flip your screen
Control+Alt+Up to put it back to normal