What Is Long-Term Investing?
Why You Should Invest For The Long Term?
Investing for the long term have certain benefits that most people that are investing for the short-term don’t enjoy. The following are some advantages of long-term investing:
- Less Volatility
Volatility measures the degree of how prices change over time. The higher the volatility means the higher the risk because the investment’s price becomes too unstable. But the more volatile an investment is, the larger your profits can be, that’s when investing for the long term has its advantage. Investments that are held longer by an investor tends to have lower volatility than those investments that are held for shorter periods.
- Less Fees
This normally applies to mutual funds that are held for the long run (typically for at least 5 years) by an investor, investment companies will remove the sales charge that could help you save money.
- Less Tax
Most investments will charge you tax on your capital gains, but when you hold on it for a while, that tax may decrease. If you think you have a good investment and it’s best to hold on to it, then do it, so that you could maximize your profits.
With all those, long-term investing is really great for persons that are saving for their retirement, children’s education, and even to those planning to purchase their dream house.
Best Long-Term Investments
You read that right, the best long-term investment that you could make is on yourself. Make yourself a better person, improve your financial literacy and watch how your life will change for the better. First thing you should do is assess yourself and find your weaknesses, then do the things necessary for you to get better.
Some ways to increase your financial literacy is through reading books, of course those about finances, and by browsing the internet where thousands and even millions of resources are available for you to use.
- Mutual Funds
Another great long-term investment is investing some of your saved money on mutual funds. Mutual funds are perfect for those people that have no or little time to manage their investments but still want to receive good returns. One known advantage of mutual funds is that their are professionals managing your money and you’re somewhat assured that they will do their best, so that they and their investors would earn.
It’s a good long-term investment because some mutual funds give better returns when you invest on them for more than a year, or preferably more than 3 years. Balanced funds and equity funds are the types of mutual funds that are known to perform well on the long run.
The stock market is a place where you could find shares of publicly-listed companies and also a place where you could either make profits or lose money. It’s the second most volatile market, second to the Forex market, and I’ve already said things about volatility and you know that investing in here could be risky. That’s why you need to be well-prepared before you go investing in stocks. The best thing about the stock market is that you can expect good returns when you invest on great companies in the long run.
Most people who are planning for their retirement buy shares, then wait for years or even decades before they sell their shares. Most of them would made a good amount of money in the end because they were able to pick good companies to invest on and now are enjoying their retirement.
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