July 2, 2022

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Short-Term Vs. Long-Term Investments

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Short-Term Vs. Long-Term Investments

The type of things you want to invest in ultimately depends on your goals. Firstly, short-term investments can be bought and sold within a short period of time and can be held for a maximum of five years, although it is often much less than that. There is generally a lower risk with this sort of investment, while long-term investments take time to mature and are higher risk but can have a much better pay-off in the long run. Here is some further information on the Short-Term Vs. Long-Term Investments options.

Short-term investments

If you want to have a lower risk option with your investments, then short-term is the way to go. Short-term investments also have high liquidity, meaning that you can move your money around or take it out with ease. While they usually yield less profit than long-term investments, day traders and active traders will often go for higher risk options with the hope of earning a higher return and they generally have a lot of short-term investments. The typical volatility of short-term investments means the value of the commodity can change in a short time, yielding potential profits (or losses) quickly. There are many different types of short-term investments including online savings accounts, short-term bond funds, and peer-to-peer loans. One of the best things about short-term investments is that you can move your money quickly, meaning if there is a sudden fall in the market you can cut your losses relatively quickly. 

Long-term investments

If you are looking for something more secure in the long run then a long-term investment portfolio is for you. These are stocks and shares that you invest in for years in the hope of a successful payoff that will set up your future and retirement. The key with long-term investments is to diversify as much as possible so that any shares that may fail do not interfere with your portfolio or overall wealth as a whole. Long-term aggressive portfolios are designed to achieve above-average returns which means investing in companies, sometimes brand-new ones, that are projected to see an increase in value. However, this comes with a higher risk as some stocks may also underperform, but it is important to see it out as stocks may recover and give you a lucrative return in the long run. People who are investing in Australian shares, for example, may choose big businesses that have been consistently successful for many years such as mining conglomerates. High risk can sometimes be rewarded with a high return.

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Conservative growth funds, on the other hand, provide a safer, more long-term strategy by mainly investing in fixed income with a smaller percentage of aggressive stocks.

Long-term investments also include real estate, which, if properly researched, is a great way to gain wealth over a long period. It is a good idea to keep up on real estate trends though, as a potentially lucrative real estate investment may fizzle out if you buy in the wrong location. 

Short versus long-term investment really comes down to what your goals are. If you are looking for a quicker return i.e. in less than 5 years, then short-term is for you but if you want to patiently build your wealth over time, then it is worth setting up a long-term portfolio and having a competent financial advisor to assist with the maintenance of it.

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