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Article Contributed by John Mussi
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Deciding Between Long-Term and Short-Term Investments
In an age when investments are more easily accessible by
everyone, it can be difficult to decide what type of investment
is best for your needs. Should you invest primarily in
short-term investments that will yield results quickly, or would
it be better to invest in long-term investments that will yield
results farther down the road?
Each type of investment has its advantages and disadvantages...
below you'll find more information on each, as well as
information to help you determine which type of investment is
right for you and your needs.
Advantages of Long-Term Investments
Long-term investments can be a useful part of retirement
planning, since they yield their results over time. They can
also help to augment savings, plan for major events several
years down the road, or establish a buffer that can be used to
cover emergency expenses that might arise in the future.
Long-term investment is a great way to put money aside for
later, all the while getting the largest return over the time
that elapses without a large amount of risk.
Disadvantages of Long-Term Investments
The biggest disadvantage of long-term investments is that they
often take years to begin to realize their potential... before
that time they are either not worth cashing in, or they have
additional fees associated with early withdrawal from the
investment. Long-term investments also tend to have much lower
interest rates or less of an increase in value than most
shorter-term investments.
While they tend to be more stable than short-term investments,
there is still no guarantee that most long-term investments will
yield more than standard savings or that investments such as
stocks and bonds won't end up lowering in their value.
Advantages of Short-Term Investments
Short-term investments are best suited for making money in a
matter of weeks or months instead of years. They are ideal for
individuals who keep an eye on the stock market and who can
recognize the opportunity that they present... fast growth that
peaks quickly.
Some types of short-term investments can also be used as a
method of putting money aside for upcoming or annual events such
as Christmas, birthday shopping, or other holidays and events.
Disadvantages of Short-Term Investments
There is generally a much larger risk associated with most types
of short-term investments, and no guarantee as to when the
bottom will fall out and the value of the investment will start
to drop rapidly. Additionally, the timing required to get the
most out of many short-term investments is precise; even missing
a purchase or a selling opportunity by a day can lead to a
significant loss in the value of the investment.
Due to this general instability, these investments are not
recommended for those wishing to put money aside for events down
the road that are more than several months away.
Which Is Right for You?
There may not be one specific type of investment that's right
for you... many investors choose to divide their money into a
number of short-term and long-term investments instead of
choosing one or the other.
To help you to determine whether you should focus a little more
on short-term or long-term investments, however, you should take
the time to consider what the investment will ultimately be used
for.
If the investment is designed to take advantage of current
market conditions or interest rates, you might be in the market
for short-term investments; if you're simply wanting to build up
additional money for later, though, then long-term investments
are likely the way to go. Just remember not to limit yourself to
one or the other exclusively
You may freely reprint this article provided the following
author's biography (including the live URL link) remains intact:
About the author:
John Mussi is the founder of Direct Online Loans who help
homeowners find the best available loans via the www.directonlineloans.
co.uk website.
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