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When I read RealMoney, “short term” and “intermediate term” are used a lot. I think short term means holding a stock for a few days (but I’m not sure), and I have no idea what intermediate term means. How are these time frames defined? — C.B.
Before you step into the investing breach, you have to ask yourself two important questions:
- Do I have the time and energy to constantly look for new investment ideas?
- Do I have the stomach to look at my portfolio every day and make constant adjustments?
If the answer to both questions is yes, then watching the stock market and parsing ideas every day can be a lot of fun. But if you don’t have the necessary time, energy and discipline, consider investing for the long haul.
As an example, RealMoney managing editor Dave Sterman says, “Ford Motor (F) is doing all the right things right now — improving quality, designing very fuel-efficient engines and streamlining costs. But investors need a long time horizon. Shares won’t likely rise while the economy is in a funk. But when the economy rebounds, Ford looks poised for a big bounce back — in my view — and shares could rise sharply. In the near term, shares could fall another 10 to 20%, as bad economic news dominates the front pages.”
So how are these “time horizons” and “terms” measured? The following is a range of takes on investment time frames from several RealMoney contributors.
How to Set a Workable Time Frame (Video)
Dan Fitzpatrick says go long or short, but make sure you set a smart time frame that works for you.
Fitzpatrick: Are you looking at a watch or are you looking at a calendar? That’s the most important thing that you have to ask yourself.
You have to know whether you’re trading the short term swings in supply and demand of stock versus the longer term time frame, which is more of a fundamental trade.
To watch the full video, click the player below:
Doug Kass: This is an exquisite trading market, not an exquisite investing market. That helps to explain why I will continue to often change the short term component of my market rating, which provides my outlook over the next one day to 30 days, while leaving the intermediate term component, which provides my outlook for the next six months to 18 months, firmly in negative territory.
Helen Meisler: For me, short term equals three days to eight days. Intermediate term: three to six weeks. I don’t do long term. I would change my mind 500 times between now and then, so why bother?!
Steve Birenberg: I don’t really trade and would be viewed as more of a buy and hold investor. I define intermediate term as 12 to 18 months and long term as 18 months to 3 years. I consider a “trade” anything from day trades to a few days or weeks, with the difference between a trade and investment being that I have a specific time horizon and price goal in mind to be achieved in a day, days or weeks when I trade. Meanwhile, my “investments” are more open-ended.
David Peltier: There’s a lot of daily volume in the markets by traders that will hold the stock for less than a day. That said, I consider short term to be any investment that will be held for less than one quarter.
Intermediate would be anything longer than that, up to a year. It’s difficult to truly have conviction and “visibility” longer than that.
Investors should re-evaluate their holdings after a major event (at a minimum, following each quarterly report). With that in mind, the only investments that I consider long term are ones that continue to sport an attractive risk/reward outlook over time.
Chris Schumacher: I consider the intraday time frame to be the day-to-day chart. The short term time frame is one where I look at the Daily chart for two to three months. The intermediate, I use the Weekly for six to nine months and the long term I use the Monthly for one year — plus.
Howard Simons: Short term: Inside of two days (initiation day, plus one more day). Intermediate: Up to three months. Long term: Anything longer.
Defining Your Holding Period: 3D Charting Correlation
“Scalpers” — Seconds to minutes: 1-Min., 5-Min., 15-Min.
“Day Traders” — Minutes to hours: 1-Min., 5-Min., 60-Min.
“Position Traders” — Hours to days: 60-Min., Daily, Weekly
“Investors” — Days to weeks: Daily, Weekly, Monthly
“Institutions” — Weeks to years: Weekly, Monthly, Yearly
Scott Rothbort: Short term: Something in the range of three to five days, with at most, two weeks. This is purely a trading time frame.
Intermediate term: This is when I see some opportunity to buy a stock that is cheap and will require several weeks — to maybe a quarter — for it to rise to a more fairly valued level.
Long term: I will hold stocks for long periods of time when I see multi-year growth opportunities and trends. This is for investment capital.
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This article was written by a staff member of TheStreet.com.