Should I swing trade or invest in stocks long term?

Both have their own advantages and disadvantages, experts advise investors to determine a school and learn skills before investing.

I see many market analysts say that stocks are a long-term investment channel, but a friend of mine always thinks that this must be a surfing channel, long-term is only for land or buying gold. In fact, I see this friend making a lot of profit from stocks, rarely complaining about losses.

I plan to invest in stocks in the near future. Which investment style should I choose?

Huynh Trung

Stock trading at a floor in District 1 (HCMC), March 2021. Photo: Quynh Tran — Stock trading at a floor in District 1 (HCMC), March 2021. Photo: *Quynh Tran*

Consultant:

First of all, we need to understand that investment is usually for long-term purposes, like planting a tree, it cannot be harvested overnight but takes at least a few years. Accordingly, the opinion that "stocks must be for surfing, long-term for land or buying gold" is only partly correct.

With real estate, if you invest in a short period of time and make a profit or close a profit with real transactions, you are in a favorable period with good liquidity in this market. It usually takes 2-3 years for the value of a real estate to grow well. Investing in gold will often benefit during periods of strong fluctuations in the world's macro situation, investors everywhere will tend to "take refuge" in this channel.

So what about stocks? Stocks are the most liquid form of investment. If you hold stocks with good liquidity like Vinamilk, Hoa Phat or Vietcombank, the entire process of closing your investment and withdrawing cash to your bank account can take less than 5 minutes. This is also the reason for the argument of the friend in the story above.

When the market is growing well (uptrend), many investors like to buy and sell continuously to make profits. This is called short-term "surfing". It is important that you have many skills such as trading methods, stock selection skills, knowledge of asset allocation and movement, emotional management ability and many more. In fact, when entering the growth wave, about 80% of investors can easily make profits and it seems that the friend above was one of them.

Regarding the surfing school, when participating in the market, you need to be careful of the "driving team" factor. They are groups with large capital, so they have the ability to manipulate stock prices as they wish, although not all codes are affected by this situation. Stocks with poor internal foundations, or "cooked" financial reports to create virtual revenue and profits to attract market attention or push stock prices up rapidly, will create greed for investors. After pushing to a certain high price range, the "driving team" will dump (sell a large amount of stocks) causing damage to investors participating at high prices. Therefore, you need to carefully research information about these types of stocks when choosing the above school.

Surfing can make money, but it should be noted that long-term investment also brings great results. If holding stocks like FPT, REE or HPG over the past 15 years, investors can almost achieve growth in value of 20-40 times. These are all amazing numbers. Similarly, billionaire Warren Buffett's investment in CocaCola also brought profits of nearly 20 times the initial value within 27 years. I think the above profits are much more attractive than short-term surfing. But to pursue this strategy, you must be really persistent and choose stocks carefully.

Good stocks can be classified by many criteria. This is a difficult type of knowledge and skill and investors in the market should be properly trained. I have listed some important factors that you can refer to as follows.

First, a good company with a long history in the industry, for example HPG, VNM, FPT, PNJ... Second, a good, consistent and transparent management team with investors, which can be recognized through annual shareholder meetings. Third, revenue and profit have grown well over many years. This is an important factor because the business exists to bring benefits to shareholders. Fourth, sound financial health, demonstrated through leverage ratios and the ability to pay interest. This is important for the business to develop sustainably. In addition, when choosing stocks, you need to pay attention to the macro context and competitive advantages in the industry.

Investing in stocks is an attractive channel, helping to diversify your investment portfolio. However, you need to clearly define from the beginning whether you want to invest or become a trader - a speculator who likes to surf.

One of the biggest mistakes that stock market participants often make is turning a short-term, losing speculative investment into a long-term investment. This is not advisable because the criteria and methods of selecting stocks of these two schools are very different. No one wants to hold a bad stock for a long time.

If you choose to follow the trend as a short-term trader, you should equip yourself with knowledge of technical analysis, risk management skills and emotional management. I think that emotions are the factor that pushes many traders to "go to the end of the road" when they let it dominate.

If you choose to become a long-term investor, you should equip yourself with knowledge of macro analysis and skills in choosing industries to invest in to suit the current context. Then, you carefully choose the best stocks in the industry. Valuing those stocks is also an important skill and takes a lot of time and effort to master.

Khanh Nguyen

Head of Investment Consulting

at FIDT Investment Consulting and Asset Management Company

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