Investments – whether long term or short term, play a key role in dictating the financial status of an individual. In today’s day and age, investments are instrumental in securing decent returns and financial success. Financial literacy and knowledge have never been more important. If there is one truth to financial markets, it is that there is no shortcut to wealth creation. Commitment, research attention, and patience play significant roles in maximizing profits.
Before we delve ahead, one thing is to be made clear – there is no clear winner between the two and it purely depends on the individual’s personal choice, as both forms of investment carry their own pros and cons. What’s suitable for one investor might not be the same for another. Small/single business owners, for example, can take investment strategies into consideration as a blueprint to meet their financial goals.
A critical difference between the two strategies is the duration for which an asset is held – that gives it the short term vs long term distinction. Hence, this article will examine to give an account of both the investment strategies without favoring one or the other.
Difference Between Short Term & Long Term Investment
Long Term Investing
If we have been taught anything, it is that it is necessary to start investing as early as possible – the longer the money is invested the more potential it has to grow. Long term investments gain value gradually, which makes it valuable to hold onto assets for more than a couple of years.
They offer higher returns after several years but involve higher market risks, serving right for people with a greater risk appetite. College funds, dividend stocks, equity mutual funds, government bonds, long term savings accounts, and real estate are the most common long term strategies, but real estate among them stands out as an exceptional long term investment. Properties gain value over a period of time as the value of land increases, especially around commercial space. Also, investing in stocks over the long term can help protect from inflation, as they provide the highest potential rate of return over time.
However, context is key. A stock can be a short term investment in the hands of a day trader but when dealt in a 401(k) account, the same can be considered as a long term investment.
It goes without saying that sticking to a long term investing strategy often gives the best returns. But learning about short term investments is also a great deal important as some individuals do not have the resources and/or knowledge to invest in the long run.
Short Term Investing
One should not fall into the trap of thinking that investing is reserved for the rich. If you have a few hundred bucks to spare, investing in short term assets could be the easiest way to get going (although long term investing is suggested), mainly because of the earlier returns.
Short term investing usually involves profiting off volatility, highly liquid assets, and acquiring near-term gains. Short term strategies involve numerous routes – one of which is betting. While investing and gambling both involve risk and choice, the former can last a lifetime whereas the latter is typically short-lived. One can gamble when they invest but one cannot invest when they gamble. As volatile as the gambling/betting industry is, it caters to different markets. Take Asiabet.org for example, where punters from Asia are provided with a resourceful platform to gain the knowledge they need to invest their money.
The extensive platform provides A-Z knowledge about online casinos and bookmakers, with a wide range of support. Bonus, rewards, and offers are also provided by bookmakers on first-time sign-ups and for regular users. Although betting is not advocated as a wise investment strategy due to its negative expected return on average and over the long run, it nonetheless, is an exciting arena to test one’s short term investing skills – mainly due to the research and knowledge it takes to find the right hand to bet on and of course, the earlier returns.
Bank deposit accounts (fixed or recurring), short term savings account, liquid funds, and stocks are the most common short term investment strategies. These come in handy if you plan to meet financial goals within a shorter time frame such as a stable regular income or for a down payment on a home.
According to Financial Times, it only takes four steps coupled with some media advice to get started on financial literacy. So, why delay? Get started on building your dream!