Forget looking at investing as a get-rich-quick exercise that can generate a significant amount of money in a short space of time. While it is possible to achieve this, the overwhelming majority of the time, it’s something to be considered over the long-term.
Chances are, you’ve heard of long and short-term investments, but you might be unsure of the definitions.
- A long-term investment typically runs over a 10-year period or more.
- A short-term investment runs for 3 years or less.
Long-term investments are assets or securities that you can expect to sell off after holding them for several years or more. Long-term investments typically involve stocks and index funds. When investing long-term, it’s possible to be more aggressive on account of the fact that you have a longer period of time over which peaks and troughs in performance can even out.
As the name suggests, short-term investments are usually sold off after holding them for three years or less. Investment assets or securities that lend themselves well to shorter investment time horizons include some stocks, short duration bonds and short duration bond-based mutual funds. Less aggressive investing is advised here because there is less time to recover from declines in value.