Prefer to invest over the short term or the long term?
Investing is one way of getting a return on your money, but unfortunately that doesn't usually happen overnight.
It is often a long-term process, one requiring patience, dedication and composure, especially if the market is volatile.
When you invest, you are best advised to carefully monitor the market and properly assess the risks.
Perhaps you've already heard of short-term investments and long-term investments, but are unsure of what they entail, what the difference is, or which investment strategy is best for you. Whatever the case, we're more than happy to provide a word of explanation.
What is short-term investing?
With a short-term investment, there is more chance that you maximise return over a period of three years or less, and then sell the investment. Often investments are sold within a matter of hours.
Short-term investing is also known as 'speculation'.
Short-term investing is risky.
You need to have adequate knowledge of the subject before embarking on short-term investing. You should also be prepared to take risks and to monitor the market closely.
It is often easier and safer at the start to plan long-term investments.
- Potential to earn a higher return
- The investment can be sold in the short term
- A good understanding of the sector or company is not required
Disadvantages:
- Higher degree of risk due to market volatility
- Adequate monitoring (time) required
- Considerable amount of investment expertise required
What is long-term investing?
With a long-term investment, there is more chance that you maximise return over a period of 10 years. Long-term investing involves pursuing a strategy over a longer period.
When investing over the long term, you leave the market to its own devices in the longer term.
You shouldn't panic if your shares fall in value and you shouldn't sell when the situation looks bad on the market. The market is cyclical in nature and has always recovered after falling in the past, though it may take some time to do so.
Advantages:
- Less risk involved
- Less monitoring required
- Also attractive for less experienced investors
Disadvantages:
- Potentially lower return
- Commitment to putting your money into investments over the long term
- Some understanding of the sector and company you invest in required
More information
Whether you're someone who prefers low risks and lower gains as a result, or someone who's prepared to run more risk for a potentially higher return, a combination of short-term and long-term investments could well be the best option.
We'll be happy to provide you with expert advice.
