In personal finance, there are a lot of terms that mean different things to different people. One of these terms is “long-term investments”. How long are long-term investments? In the world of finance, an investment held for 5 years or more is considered a long-term investment. Long-term investments are those crucial investments you make to secure your finances for long-term goals, like, retirement, marriage, children’s education, etc. While making decisions now that can have profound effects on your future you need to be careful. There are certain things all investors should keep in mind while making long-term investments:
- Set clear goals: Before you start making any investments make a list of all the long-term financial goals you have and how long you have to achieve them, you need to be clear about what you want to achieve. Most of your long-term goals should remain unchanged, as your investment strategy is geared around them.
- Have a plan: There are many ways to pick investments but it’s important to stick with a single strategy when it comes to picking them. Changing between strategies frequently can make you a market timer which is considered dangerous territory when it comes to long-term investments. Long-term investments usually do not perform well in the short-term, but come into their own over long periods of time.
- Watch your taxes: Achieving the best returns from your investments is your primary goal, but you should keep an eye on the tax liability these investments carry. According to the Union Budget of 2018, investors will have to pay 10 percent tax on profit exceeding Rs. 1 lakh made from the sale of shares or equity mutual fund schemes held for over one year. Long-term Capital Gains (LTCG) can have significant effects on your investments over the long-run.
- Keep an open mind: While there are many popular long-term investments in the market there are some very good, but less popular investments due to a lack of brand awareness in the market. Keep an open mind to do the research and make investments in financial products that are not necessarily too popular right now but have the potential to give you great returns.
- Don’t sweat: When you make investments in financial products there are bound to be fluctuations. Don’t let these fluctuations intimidate you and look at the bigger picture. Have confidence in your investment and don’t be thrown off track by short-term volatility.