Long Term Vs Short Term Investments – What Should I Do?
Investing is not child’s play. It takes a lot of planning in order to achieve the desired goals. The key elements to consider while investing in any kind of business include the time span, capital and genre of business venture you are aiming for. All these elements are interlinked, however depending on the time span you can better judge and decide rest of the alternatives that might prove to be more favorable.
Investments are grouped as short term and long term. Both have their own advantages as well as disadvantages but it is advisable to merge both and plan out the reinvestment opportunities to keep profitability a cyclic activity. The short term investments yield quick results. If you want to earn high profits in a small span of time you should opt for short term investments. In order to maximize your gains, you need to constantly analyze the market conditions and keep a track of the probable fluctuations. Most people who go for short term investments take these as an opportunity to multiply their capital for major long term investments. Buying stocks, investing in gold, taking loans or buying bonds, all fall into short term investment categories.
Despite all these advantages, short term investments have a huge number of draw backs associated with them. High risks come with high return. Since short term investments require precision timing, it is very likely that the gains that you are aiming for may turn into loss. The erratic conditions and fluctuating market trends greatly affect the yield from short term investments.
Talking about long term investments, they are less risky and favored by less adventurous investors. These investments take a couple of years to mature. The capitalists earn relatively less return but the profits keep on coming for several years. These investments are preferred for secure long term goals. Individuals who go for long term investments normally pour their money into retirement plans, provident funds or children future programs of different types. Even real estate is a type of long term investment. These investments require patience but the benefits keep materializing for several years to come.
Every picture has two sides and thus with the tremendous amount of benefits that long term investments have to offer, there are large number of risks involved as well. Mainly these investments are not for people looking for instant big gains. Secondly it is not necessary that with time, the returns increase. These investments are equally subject to losses as well and it all depends on the market conditions. Lastly the long term investments offer less control over your capital as compared to short term investments and you are subject to certain penalties and losses in case of early withdrawal through certain long term plans.