Many people usually feel frustrated by the performance of their investments. They expect rapid growth and they don’t seem to get it. Or they often think the value of their investment won’t fluctuate much, but it does. However, much of this frustration wouldn’t exist if investors were more familiar with the nature of their investment vehicles. Most importantly, it’s important to keep in mind the difference between long-term and short-term investments.
Defining long-term and short-term investments is an important step in entering the investment world. Long-term investments are those vehicles that you intend to hold for more than one year. Generally, this investment is to be held for several years. On the other hand, short-term investments are for one year or less.
There are many things to consider and many distinctions between the two when deciding between short-term and long-term vehicles. Below are a few distinctions to consider:
When you purchase an investment that you intend on keeping for many years, you may be expecting it to increase in value so that you can eventually sell it for a profit. When you purchase a short-term vehicle, you are generally not expecting much in the way of a return or an increase in value.
Depending on what you need at a certain time in your life you will choose between the two investments. If you’re young and just starting out in your career, you may require a mix of long-term and short-term investments. You may want to choose a short-term investment to help pay for a down payment on a home. A long-term investment may be a great choice to help build resources for your retirement.
Satisfy Different Goals
If you are purchasing an investment that you intend to hold for the long haul, you probably have long-term goals in mind. A goal like building resources to help pay for a comfortable retirement or leaving a legacy. Opposite to that, short-term investments would be appropriate if you know that you will need a certain amount of money at a certain time. This would include a purchase of a car or to fund a vacation.