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Knowing the Difference between Short-Term and Long-Term Opportunities

With the return of volatility to the market, itâ??s crucial to understand the differences between the short- and long-term opportunities. It is even more important not to mistake one for the other, since that situation can lead to disastrous results and a loss of capital.

One of the more frequent questions I get from investors like you, as well as the institutional ones I have known for many years, is: how do I decide if something is a short-term or long-term opportunity? It is a timely question, even when the stock market is humming along like it did in the last half of 2013. But these days, with the return of volatility to the market, itâ??s even more crucial to understand the differences between the two. It is even more important not to mistake one for the other, since that situation can lead to disastrous results and a loss of capital.

As I just mentioned, volatility has returned during the last few weeks, as evidenced by the sharp move higher in the volatility index (see chart below). Reasons for this move include renewed concerns about global growth, a growing number of companies slashing their short-term outlooks and issues in the emerging markets, as well as worries about a potentially stepped-up timetable for the Federal Reserve to complete its tapering plans. While I continue to think the pace of the Fedâ??s curbing efforts will remain data-dependent, the overall combination of factors has pressured the U.S. stock market lower, and the S&P 500 Index now is down about 4% from the end of last year as I share this update with you.

Pullbacks in the stock market can be a solid and a very profitable ally to the patient investor.

Read more about how to profit from both short-term and long-term investment opportunities at Eagle Daily Investor.

Written By

Chris Versace is a financial columnist and equity analyst with more than 18 years of experience in the investment industry. He has been ranked an All Star Analyst by Zacks Investment Research and his efforts in analyzing industries, companies and equity securities have been recognized by both Institutional Investor and Thomson Reutersâ?? StarMine Monitor. Heâ??s frequently published in The Washington Times and is a frequent contributor to the daily radio show â??Americaâ??s Morning Newsâ?ť and â??Americaâ??s Radio Newsâ?ť. He has been quoted in the Wall Street Journal, Investorâ??s Business Daily, The Street, USA Today and other publications. In addition, he can be frequently seen on televisionâ??s â??Fox Businessâ?ť show.

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Knowing the Difference between Short-Term and Long-Term Opportunities

One of the more frequent questions I get from investors like you, as well as the institutional ones I have known for many years, is: how do I decide if something is a short-term or long-term opportunity? It is a timely question, even when the stock market is humming along like it did in the last half of 2013. But these days, with the return of volatility to the market, it’s even more crucial to understand the differences between the two. It is even more important not to mistake one for the other, since that situation can lead to disastrous results and a loss of capital.

As I just mentioned, volatility has returned during the last few weeks, as evidenced by the sharp move higher in the volatility index (see chart below). Reasons for this move include renewed concerns about global growth, a growing number of companies slashing their short-term outlooks and issues in the emerging markets, as well as worries about a potentially stepped-up timetable for the Federal Reserve to complete its tapering plans. While I continue to think the pace of the Fed’s curbing efforts will remain data-dependent, the overall combination of factors has pressured the U.S. stock market lower, and the S&P 500 Index now is down about 4% from the end of last year as I share this update with you.

Pullbacks in the stock market can be a solid and a very profitable ally to the patient investor.

Read more about how to profit from both short-term and long-term investment opportunities at Eagle Daily Investor.

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