Short and Long Term Investment
Investing is all about getting the most out of the invested capital by loaning it to others. These investments take many forms such as bonds, stocks, mutual funds, real estates and so on. While investing, it is very important to know the investment options and the duration; because it can directly affect the yield and growth of the capital.
Two important investment strategies are often talked about such as long term investment and short term investment; and by comparing benefits and disadvantages of these investments, one could decide which investment best suits his financial needs.
Comparison between Short Term and Long Term Investment:
The investments held for less than a year are called as short term investment; and they are designated for short period of time hoping for significant yield. On other hand, long term investment is the investment that is held for longer duration, more than a year. They are designated for slow but steady increase in the yield over the specified term over the year.
Advantages and Disadvantages of Short Term Investment:
The advantage of short term investment is that the term (duration) is very less from few weeks to few months, with a potential of fast growth. Also, the money isn’t out of possession for longer duration, and by observing the fluctuating market, the investor can control his money readily without incurring great loss.
The disadvantage of the short term investment is that it is highly risky, as the market fluctuates rapidly. The investor might turn up in losing money especially in case of Bonds and Stocks, which has to be sold at the highest peak before their drop begin.
Advantages and Disadvantages of Long Term Investment:
The advantage of long term investment is that it yields significant growth, with slower pace and much lower risk as compared to the short term investment strategy. They provide greater stability for the retirement funds or savings funds over the specified term, which mature just when they are needed over the year.
The disadvantage of the long term investment is that it yields slowly, and takes years to mature. For the investors who wish to get high yield in short period of time or wish to utilize that money within a year; long term investment is not advisable. Since the market fluctuates every now and then, long term investment might dip down heavily over a period of time before it could actually show significant rise in the investment. Additionally, the money is invested for longer duration and many a times there are penalties if it is withdrawn before its maturity date.