Investment is one way to develop wealth owned. Investments can be made in various ways, such as buying stocks, bonds, property, or by investing in a business. One type of investment that is quite popular is long-term investment.
In this article, we will discuss what long-term investing is, the goals of long-term investing, as well as some examples of long-term investments to choose from.
What is Long Term Investment?
Long-term investments are investments made with the aim of obtaining profits over a longer period of time than short-term investments. Long-term investments are usually made by buying stocks, bonds or property.
Read Also : What is Diversification? Its Definition, Purpose, and Strategy
Long-term investments have a lower risk than short-term investments, because the value of the investment will usually continue to increase over time.
The difference between long-term investment and short-term investment lies in the investment period. Short-term investments are usually made for a short period of time, between a few months to a year.
Meanwhile, long-term investments are made over a longer period of time, between one year and several decades.
Long Term Investment Goals
Long-term investing has different goals for each individual. Some general goals of long-term investing include:
1. Retirement Preparation
Long-term investments can help financially prepare for retirement. By making long-term investments, one can accumulate enough wealth to meet financial needs in retirement.
2. Buying Property
Long-term investments can help to buy properties such as houses or apartments. With long-term investment, one can collect money to make a down payment and pay monthly installments.
3. Increase Revenue
Long-term investment can provide passive income which can help increase one’s income. With passive income, a person can earn additional income without having to work actively.
4. Reducing Financial Risk
Long-term investments can help reduce financial risk. By making long-term investments, one can better manage financial risks.
Read Also : What Is a Dividend? Definition, Type, Way and Distribution
Example of Long Term Investment
Long-term investing has several examples of products that can work. Here are some examples of the best long-term investments that you can try.
1. Stocks
Stock investment is one of the most popular types of long-term investments. Stock values tend to increase over time, so investing in stocks can provide substantial returns over a longer period of time.
2. Bonds
Bonds are debt securities issued by governments or companies. Bond investment can provide passive income in the form of interest that is paid regularly.
3. Property
Property investments such as houses or apartments can provide benefits over a longer period of time. Property values tend to increase over time, so property investment can provide substantial returns.
4. Mutual funds
A mutual fund is an investment that pools funds from multiple investors and invests these funds in various financial instruments such as stocks, bonds and deposits. Mutual fund investments can provide benefits over a longer period of time.
Read Also : 10 Ways to Become Rich in the Future
Advantages and Risks of Long Term Investment
Long-term investing has several advantages, some of which are as follows.
1. Long Term Profits
Long term investing has advantages over a longer timeframe. Investment value will continue to increase over time, so that long-term investments can provide greater returns than short-term investments.
2. Maintain Investment Balance
Long-term investment can help to maintain investment balance. Short-term investments are often high-risk, so long-term investments can help reduce those risks.
3. Obtain Passive Income
Long-term investments such as property or bonds can provide passive income . Passive income is income earned without having to do active work. With passive income , investors can earn profits continuously without having to work actively.
However, long-term investments also have risks that must be considered, including the following.
1. Market Risk
Investment value can decrease due to unpredictable market factors, such as economic crises, wars or natural disasters.
2. Liquidity Risk
Long-term investments usually require a longer time to sell, so investors must pay attention to the liquidity risk of these investments.
3. Inflation Risk
Inflation can affect the value of long-term investments. If inflation rises, the investment value will erode. Therefore, investors must choose long-term investments that can provide a higher rate of return than the rate of inflation.
Read Also : What is Frugal Living? Definition, Benefits and Tips
Tips for Choosing the Right Long Term Investment
Choosing the right long-term investments is very important for achieving long-term financial goals. Here are some tips for choosing the right long-term investment.
1. Determine the Risk Profile
Before choosing a long-term investment, you must determine your risk profile. Are you willing to take high or low risks? Your risk profile will affect the type of long-term investment that suits you.
2. Do Research
Before making a long-term investment, do some research on this type of investment. Learn about the returns, risks and performance of the investment.
3. Investment Diversification
Don’t put all your money in one type of long-term investment. Investment diversification can help reduce financial risk.
4. Choose Consistent Investments
Choose long-term investments that are consistent in providing returns. Investments that have good performance over a long period of time are the right choice.
Long-term investments are investments made for a longer period of time than short-term investments. Long-term investments have lower risks than short-term investments, but also have greater returns over a longer period of time.
Read Also : What is a Deposit? Definition, Types, and How to Count
The goals of long-term investing vary from person to person, but can include preparing for retirement, buying property and increasing income. To choose the right long-term investment, you need to do some research first and determine your risk profile.
This is an article about long-term investment information. Hopefully the above article is useful, yes!