Investing can often be a frustrating endeavor. If you’ve never tried it before, you may be completely lost as to what to do or where to begin. Others have spent years trying to learn the ins and outs of investing but aren’t able to make the progress they’ve wanted to. However, one of the areas many investors are lacking in is the ability to differentiate between short-term and long-term investments.
Simply defined, a short-term investment is an investment held for a year or less whereas a long-term investment usually lasts longer than a year. In this blog, we’re going to help you understand both of these concepts a little bit better.
The main difference between short-term and long-term investments is the expectations. With a short-term investment, you’re going to have much lower expectations. Any investment lasting less than a year cannot be expected to see as much returns as a long-term investment. On top of this, there is more room to adjust or work with your long-term investments in order to see better returns.
Typically, long-term investments are associated with a higher level of risk. These is not always the case, however, when you spend over a year invested in one thing, your losses will be much greater than if you invested in something short term. The reason for this is something called volatility. What this means is that the financial area that you invested in could have changed rapidly over a few years, leaving you uncertain about how your investment will turn out.
Long-term investments are usually associated with long-term goals and short-term investments are usually associated with short-term goals. If your goal is to start a company in a year, this is a short-term goal, and as such, you’re going to need a short-term investment to prepare you for it. On the other hand, if your goal is to plan for retirement, you’re going to need a long-term investment to make this happen.
It’s only natural that as you get older, you’ll be involved in more long-term investments. People who are younger and less experienced with investing will want to make more short-term investments in order to learn how to work with their money and see returns. However, someone who’s older and more experienced will be involved in more long-term investments because they’re more confident in their ability to see returns on their investments. This is not always the case though, savings accounts are one example of a long-term, low-risk investment that young people make.
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Guardian Financial Group is committed to your financial success. Life is filled with difficult decisions, and when it comes to short and long-term investments, we want you to make the best choices for your financial future. We are experts in financial planning, retirement planning, education funding, tax planning, and insurance analysis, so give us a call today if you’re ready for a free consultation.