Investors will always be confused and dilemma in choosing the investment period. For some investors, short-term investments are chosen because they have the potential to provide faster returns. Meanwhile, long-term investments are chosen to take advantage of the compounding effect, minimize risk, and to realize various financial goals in the long run. If you are faced with two choices of the investment period, which period do you prefer? Certainly must be based on the needs or objectives behind the investment itself. For most investors, if you have to choose, of course, this is a difficult choice. However, there are many investors who combine the two investment periods in their investment activities. Here are the considerations based on Capitalist Exploits Blog.
Considerations on choosing short-term investments
Many investors who prefer to accelerate the velocity of money so that they prefer short-term investments so that the return in the form of the principal investment and interest can be obtained more quickly. After that, they reinvest principally in Capitalist Exploits Newsletter Signup, or trade-in financial markets, and so on.
Meeting short-term needs
For the majority of young professionals, where monthly income is still not enough to invest every month (routine investing), short-term investment is considered the most appropriate choice. Because, in the future, there are only short-term needs that must be met, while emergency funds cannot be routinely set aside from relatively small monthly income.
Considerations on choosing a long-term investment
Maximizes the compounding effect
Many investors tend to choose long-term investments because in fact the benefits of the compounding effect in boosting the valuation of funds from time to time. The compounding effect is actually very common in the world of investment and credit. It’s just that, many investors have not maximized the benefits.
Minimize potential risks
Short-term investments are actually vulnerable to risk, mainly because of the high level of fluctuation, and investors who choose long-term investments tend to aim to minimize such risks. Although long-term, long-term investments can gradually increase the value of money invested consistently. Although slower, the stable rate of long-term investment allows a much greater level of stability and a much lower risk than a short-term investment.
Meet a variety of long-term needs
Various long-term needs such as marriage costs, children’s education costs, to pension funds can be met with long-term investment yields. Investors only need to be patient because the time required is longer.
If you already understand it, now please specify your investment goals and separate which money is not really needed in the long run and which money will be used in a period of a year or less. This will greatly help you in determining your investment choices according to the time period.
If you choose an investment with a longer tenor, chances are that you have long-term goals to fulfill such as buying a home or preparing a pension fund. Conversely, the short-term investment will be a more appropriate choice if you know very well that you will need a certain amount of money at a certain time such as buying a vehicle or continuing formal education abroad.