by Catlin Hogan

Created on: August 06, 2008

While both short term and long term investing can and likely will make you money, they both have their own pros and cons.

Short Term Investing
If you are looking to make money in the short term, you need to ask yourself two very important questions; how much money do I want to make? How much time am I going to give myself to reach that goal? If the answer to the second question is longer than six months, than I recommend you skip down to the long term investment section. You should be warned though, that bigger the answer to the first question, and the lower the time limit in the second question, the higher the risk you end up playing with.

The quickest way to make a quick dollar (or to lose a quick dollar) is by doing what is known as shorting equity. Essentially what it means to short equity is the reverse of the "buy low, sell high" mentality; what you want is to short (or buy) high and cover (or sell) low. The experienced traders in Toronto and New York will study a trend of what a particular equity has been trading at over a period of about three months. With this information, they will determine if by chance this equity is over valued at the time and that a market correction is in the near future. Many of these same investment veterans will also tell you, if you do decide to go this road, do not short an equity for more than a day of trading, if you do keep it more than a day of trading, you open yourself up to fees from your brokerage firm. If you are not afraid of possibility of losing a few dollars in the process, look at lower priced equities. By shorting lower priced equities, it allows you to buy more shares and can significantly improve your earnings (or make you lose your shirt just as fast). If you decide to go this route, be forewarned that shorting equities is not for the faint of heart, you need nerves of steel to make it through the day.

Long Term Investing
As with short term investing, there are also two questions you need to ask yourself before you decide on a long term investment strategy; what degree of risk am I willing to take? How much can I afford to put toward this investment on a monthly or bi-monthly basis? Anyone looking into long term investing such as RRSP's or RESP's, I would strongly recommend a simple low risk approach. The one downfall of RRSP's and RESP's is that if you decide to pull any money out of these plans before the age of 65 or before your child turns 18 is that the money would be subject to capital gains tax in Canada.

RRSP's (Registered Retirement Savings Plan) are very handy to have, especially if you are in your twenties or thirties; with the condition of Social Security in the United States and the Canadian Pension Plan, these RRSP's can work as a security blanket. If you decided to go low risk, and were to put away roughly $40 a pay check, over the course of twenty five years at an estimated thirty per cent growth in interest, you would have over $33,800.

RESP's (Registered Education Savings Plan) is essentially the same thing as an RRSP, but is meant for parents to save up money for their children's post-secondary education. If you decided to go low risk and were putting away $30 a month from the time your child was born and with an estimated twenty per cent interest growth, you would have over $7,700 which can definitely pay for at least the first year of a post secondary tuition.

If neither of those two options tickles your fancy, I would recommend going with mutual funds none the less, but instead of registering them as a RRSP or a RESP, go non-registered.

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