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Long Term Investments vs Short Term Investments

All you need to do is find the right balance between short term and long term investments.

Updated:May 20, 2019, 1:17 PM IST
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Long Term Investments vs Short Term Investments
All you need to do is find the right balance between short term and long term investments.

When it comes to investments, the first thing you need to do is be very clear as to what you want out of it and what are you investing your money for. Based on that, the next decision would be to decide whether a long term investment makes sense for your scenario, or a short term investment is the way to go. Here’s a lowdown for those who are confused between investing for the long term or go short term.

Make it goal oriented:

If the goal you want to meet is in the long run, i.e. leaving a legacy for your kids, or live a cozy life after retirement, or save for your children’s school funds, a long term investment is better. On the other hand, if your goal is near sighted such as buying a four wheeler of your own, take care of wedding expenses in the near future, then a short investment makes more sense.

Decide your pace:

When it comes to long term investments, you can afford getting aggressive and putting in money, as there is lesser risk of losing your money. If the market goes down, you have time to sit back and wait till it eventually recovers. You have the luxury of time, which a short term investment would not be able to offer. That leads us to the third point.

Diversifying is the name of the game:

When it comes to short term investments, the risk is higher; and it gets worse if you put all your money in a single spot. Put portions in different products and varied companies, so that you don’t lose it all in one snap if the company goes under.

Take stock of the risks you’re taking:

Not that long term investments don’t come with risks. While you have time by your side, the market fluctuations are unpredictable anyway. Short term investments hold the risk of not holding enough return value when adjusted by inflation.

How old are you?

If you are just starting out and have age by your side, congratulations! Choose a long term investment. Already retired? Short term investments as long term investments don’t make sense. You might need money in the immediate future for health reasons or that trip you have been denying yourself all these years.

Here’s a better solution. All you need to do is find the right balance between short term and long term investments. Invest short term with the money that you will have no qualms in losing. And keep adding significant amounts in long term investment plans. With this, you get the best of both worlds, or worst case scenario, the worst of just one.

To know more, click here.

This content has been created in association with YONO SBI

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