Are Long-Term or Short-Term Investments Better?

Learn whether short or long term investments are right for you right now.
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Investing is a long-term process. While many people try to play the market or speculate with day trading it is a risky business and you really need to understand what you are doing before you try short-term investments. For most people, it is easier, and safer to plan on long-term investments. You can use a financial planner to figure out what your comfort level is for your risk and to to find investments that match your comfort level.

Before you begin investing, it is important to clearly understand the market and the risks associated with it. Additionally, if you need to money in a shorter amount of time, it is better to be more conservative as you invest so that you have time for the market to recover if it suddenly drops.

Long-Term Investments

Long-term investments will pay off over several years. You should determine the rate of return you want and look for a mutual fund that averages that rate of return over a five or ten year period. When you invest for the long-term you should not panic when stocks drop and you should not sell when the market looks bad. The market has always recovered from drops in the past, although it may take time to do so. However, if you pull out when prices are low, you lose the money that you initially invested. If you leave your investments alone ,then they should recover over time.

The longer you have to invest your money the bigger the risks you can take.

If you need the money in the next few years, you will want to take a more financially conservative approach to your investments and may opt to put it in the bank or another more secure type of investment. Another factor in choosing the type of investment may be what you are planning on using the money for.

This may determine how much risk you feel comfortable with while investing.

Short-Term Investments

If you are doing short-term investments, you need to understand the market that you are entering. Be careful of single stock purchases. If you do own single stocks in companies be sure that you monitor the companies on a regular basis. Additionally, you should not have all of your investments in just one company. If that company were to go under then you would lose everything. You should spread your stocks over a variety of companies and types of companies. For this reason, it is often easier to choose a few good mutual funds that already spread the risk by purchasing several different types of stock.

Short-term investing is considered to be speculation or gambling by some people. It is because there is a great deal of risk involved, and often people will lose their money when they do this. If you want to try short-term investing be sure that you do not put all of your money or assets into it. Only invest money that you are willing and comfortable losing. Even if you are most interested in short-term investing, you should set aside a portion of your money that you will leave in long-term investments.

This will protect you if you were to lose your money because of a sudden market crash or bad investment. Investing is an important wealth building tool, and you should not let fear put you off from investing. Instead be sure to research any investments and get the help of your adviser.

Finding the Right Balance

When it comes to investing, it is important to find the right balance for you and your individual situation. You need to have clear goals in mind as you being investing and sitting down with a financial planner can help you determine the best way for you to balance your portfolio. the biggest thing to remember is the need to diversify your investments across businesses and and types of businesses. You may even want to diversify about buying investment property. Your financial goals will help you determine the best course of action for your investments since when you need the money can also help you determine the amount of growth you need in a specific time frame.