Every Investor should know all the details of any investments they make, and anything that may affect these investments in the short and long term. Investing for the short or long term offers differing advantages and disadvantages. Investing for the long term offers many advantages that investors who try to time the market, or day-trade over the short term, simply can't take advantage of.
In this Blog post, we've put together some tips for investing into long-term investments.
What is a Long Term Investment
A long term investment is any investment that has an estimated higher (historic) probability of maximizing your returns over a ten year period as compared to competing alternatives.
An Example of Long Term Investment
For example, if you want to put $10,000 away in the bank for ten years and you are trying to decide whether to invest in stocks, bonds, cash or a crowd investment, using the definition above you’d ask yourself what investment is most likely to maximize your return over that period.
Of course, you (unfortunately) don’t have a crystal ball (!), so you can never be certain what the outcome will be! However, if history is any guide, you could reasonably expect that investment has the higher probability of providing the best overall return over the next ten years.
Advantage of Long Term Investing
The advantages of long-term investing are found in the relationship between volatility and time. Investments held for longer periods tend to exhibit lower volatility than those held for shorter periods. The longer you invest, the more likely you will be able to weather low market periods.
1. Historically paid off
A long term investment can take the historical performance base, as staying invested in the market over the long term has historically paid off.
The stock market tends to reflect the overall growth and productivity of the economy in the long run.
2. A benefit of averagingShort-term investments
are generally lump-sum and triggered by a quick upward rush in the market for prospective gains, which have an equal risk of downside too. Unlike short-term investments, long term investments offer a benefit of averaging as total resources can be invested at different points of time (for example, SIPs).
3. Retirement planning
Retirement planning, accumulation of wealth, high and steady returns - all these benefits are easily achievable with planned long term investments.
4. Start investing in property as young as you can
An advantage of long term investments are that you can start investing in property young, and then hold onto the property as long as you can, to potentially maximise the return on investment.
Related Article:Why Crowdfunding is great for young Investors
5. Capital growth would be high
Choosing a location where your property will achieve a higher rate of capital growth than the general market will mean that over time the equity level in the property will increase and that will give you the ability to purchase more investment properties.
Related Article: Introduction to Investing for Capital Growth
New Methods of Long Term Investing - Real Estate Crowdfunding
For the last few decades, the most obvious method of investing in real estate for the long term was buying a property, renting it out, and holding it for the long run. These days, new methods of investing have changed the investing landscape - real estate crowdfunding now allows for better access to pre-vetted investment opportunities with high returns.
These real estate crowdfunding platforms make it possible to invest in both short and long term investments with as little as $1,000.
The property market moves in cycles — hold onto your investment to ride out these property cycles and create significant personal wealth over the long term.
Investing for the long term offers some advantages that investors who try to time the market, or day-trade over the short term, simply can't take advantage of.
The longer you stay invested, their is lower potential risk of losing funds. Long-term investments ensure consistency as against speculative gains. Successful investors base their actions on deep research rather than random market ups and downs.
"Any advice provided on this blog is general in nature. Readers are urged to seek their own professional advice before making decisions."
Oct 06. 2017