|Long-Term Investments? Short-Term Investments? |
WRONG DECISIONS COULD RUIN YOU. ↓↓↓↓
Investing isn't ordinarily a get rich quick strategy that you can accomplish for a brief time frame and hope to make a lot of cash. It's generally a long-term process that requires tolerance, duty, and resisting the urge to panic when the market changes, as it unavoidably will.
A main concern for any type of investing is market volatility – which measures the degree that prices change over a given time. The greater and more frequently an investment price swings, the higher its volatility. Investments with a higher volatility have a higher degree of risk.
Market volatility is often attributed to short-term investments rather than long-term investments. A security (stocks, bitcoin, currencies) can be highly volatile on a daily basis. If you have the capital and stick-to-it-ness you might be able to weather the more serious dips that might happen.
As far as long-term or short-term investments go you may be wondering, what are the differences, which one is best for me, my family, my company, my goals.Well, you should determine your goals. Figure out how often (daily/weekly/monthly) you want to monitor your investments. Determine the time frame of investment - the length of time you want to cash out based on your goals and planning. Then figure out the rate of return you want. Then locate the vehicle(s) that will fit all those needs and wants. Then figure out your initial investment amount you can comfortably make and head into the waters.
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A long-term investment typically offers a higher likelihood of maximizing your return over a 10, 15, 20, 30 year plus time frame. Examples of long-term investments can include real estate, annuities, stocks, long-term bonds, mutual funds and index funds. The longer the better as long as steady growth and returns are being obtained. With this longer time period you have more of a time period to make adjustments, change investment vehicles, realize gains, etc.
When you invest in long-term investments you must not panic at small drops and avoid selling just because the market looks bad. It's actually best to avoid watching your portfolio consistently as it's hard to overcome urges to pull your funds during small dips - which will surely happen!
Historically, the market is cyclical and consistently recuperates from drops. And in the event that you pull your funds during market lulls, you very well may lose some portion of your initial investment capital. You are prepared for steady gains over time. You have predicted and even invested into a vehicle that will have ups and downs.
One thing that can minimize the risk, is to invest in real estate backed investments. Any investment actually backed by something tangible that you can claim if all else fails is always a good option. And long-term real estate prices steadily increase. In 1940, even adjusted with current inflation rates, the price of a home was $30,600. Today it is about $226,800. So real estate backed investments are generally a good bet.
You have to stick with the investment period. You won't acquire much gain if you pull out in three years for sudden need or whatever if the investment period was for 20 years. You can diversify with shorter term vehicles to fill this need.
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As the name implies, short-term investments are usually sold after holding them for less than three years. Examples of short-term investments can include money market accounts, municipal bonds, certificates of deposit (CD's), treasury bills and government bonds.
You may also hear of short-term investors being referred to as day traders. This is currently a highly touted and popular method, but it’s risk is quite high. Before getting into this type of investing, educate yourself fully, work to understand the basics of the stock market, be careful of single-stock purchases, and be mindful that it's very, very difficult to gain higher returns than the average rate of return of the stock market (about 7%) by trading short-term.
Additionally, it is always good practice - and standard practice for most - to diversify. Not putting all your investments into one vehicle is good practice. If that company were to go under, or that stock crash out you would lose everything. Diversify your risk by spreading your investments over different vehicles, even short and long term investments. Look over some of the largest companies in the world and they all have serious diversification happening.
|And as a word of advice, and standard operating procedure for any good investment advisor, is to only invest money that you can afford to lose, not money that needs to pay the mortgage next month.|
Finding the Right Balance
When it comes to investing, it is important to find the right balance for you and your individual situation. Before you start investing, whether it be short or long-term investing, you should have clear goals in mind. And even into what companies you would like to support or lend your capital to. This is often over looked by most beginning investors.
Even if you are most interested in short-term investments, set aside a portion of your money for long-term investments. This will protect you if you were to lose some of your money because of a sudden market crash or a bad investment. Investing is an important wealth-building tool and not something to avoid or be afraid of. And careful planning and fully educating yourself on the various styles of investing and past successful actions by industry leaders will help minimize that risk and provide success for the life you are planning and working toward.
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